Last week we looked at the scope of macroeconomics, albeit quite briefly. This week we'll get into some national accounts and growth questions. We'll talk about the main questions in growth theory, motivate it with an example, and discuss the macroeconomic particulars a theory of growth and development has to explain. It's always useful to begin with a story. Argentina in 1900 was the richest country in the world. A series of macroeconomic downturns culminated in the banking crisis from 1999 to 2002. Here's a quote from one of the people who had to live through this period:
"You know, we're not used to this, not having enough food," said Orresta, with a hint of embarrassment in her voice.
She paused, and began to weep.
"You can't know what it's like to see your children hungry and feel helpless to stop it," she said.
"The food is there, in the grocery store, but you just can't afford to buy it anymore. My husband keeps working, but he keeps bringing home less and less. We never had much, but we always had food, no matter how bad things got. But these are not normal times."
In the second half of this course, you will be exposed to models of the macroeconomy---the study of the aggregated actions of households, firms, government, and other economic actors in society. We'll look at the national accounts, how fluctuations in the economy are measured, look at some of these measurements, and talk a little about economic growth through the story of Ireland. That's the topic for this lecture. The important thing to remember from this lecture is: growth matters.
What is the macroeconomy?
The economy can be thought of as a productive engine. It takes raw materials like land, and physical capital, and combined with
labour (physical labour and skilled labour) and a little enterprising entrepreneurship, produces goods and services. These goods and services add to the stock of goods and services already produced in years past, and the economy is said to grow by the amount produced in the economy.
Definition 1 (The Macroeconomy) The macroeconomy is a machine for producing goods and services.
How do we measure the macroeconomy?
When we discuss the macroeconomy, we need to talk about aggregated variables. Aggregated variables are the sums of individual variables. For example, total private consumption in an economy over a period of time, 
, is the sum of all the goods and services consumed in the economy by households in a given period, say, a year.
We also talk about the relationships between those aggregated variables. We don't really know these relationships, so we invent a story about them. These stories are called models.
Definition 2. (Models) Macroeconomic models are stories about how one or more aggregate variable affects another.
Growth rates
We can calculate the growth rate of the economy by calculating the gross domestic product of the economy from year to year and getting their relationship.
Definition 3 (GDP) The gross domestic product (GDP) is the sum of all final goods and services produced in the economy in a given year.
The GDP growth of an economy can be measured by
GDP Growth = GDP_(t)-GDP_(t-1)/GDP_(t-1) * 100
So, for example, if GDP in 2006 was 105, and GDP in 2005 was 100, the growth rate of GDP would be ((GDP_{2006}-GDP_{2005})/GDP_{2005}-1)*100=((105-100)/100-1)*100=5\%.
Measuring the Macroeconomy
We'll spend some time looking at Ireland's National Accounts, because through them we can gauge how well the economy is doing.
Image via Wikipedia
Then we'll talk about economic growth. You've already seen that growth matters in the last lecture, but this time we'll go through a model, called the Solow model, which explains how economies grow, when they don't, and when they do.
In this lecture, we'll study the case of Argentina in the 1990's. You can see from Gapminder that Argentina has had a rough ride in terms of GDP per capita over the last 50 years. We will see examples of this in the lecture.
