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Case Studies in Macro Economics

A tour of historic economic events decoding them to understand core concepts in Macro-Economics
Loony Corn
1,525 students enrolled
English [Auto]
Over 21 lectures and 4 hours of content!
Understand what can lead to inflation and when the markets could be cheerful
Know when Central Bank may raise interest rates and when is the right time to invest
Decode success stories of GDP growth and know when an economy can boom
Know how oil price change impacts your foreign earnings and expenses
Determine how Government decisions can impact your salary

Course Description

This is a tour of historic economic events decoding them to understand core concepts in Macro-Economics.

Let’s parse that

  • ‘why macro-econ’:Central bank and Government budget decisions effect an individual’s financial situation. Knowing what are the stimulators of these decisions can smooth out financial planning. This is where learning Macro-Economics will help sail your boat.
  • ‘story-telling’: Macro-economics is nothing but an engaging story of how, why and in what way do People, Government and Central Bank react to economic events. No wonder that the process of learning Macro-Economics should also be a story. We have done exactly that. By looking into historical events with a magnifying glass, we elaborate every little concept that literally govern economic decisions.
  • ‘the big picture’: Half knowledge is always dangerous. Everything in macro-economics connects in some way. Understanding how everything intersect in the bigger picture of things only would assure sound decisions. This course helps you understand why recession follows boom, or why interest hike trails inflation. We will connect the dots of major macro-economic concepts.

What’s Covered:

  • Recession of 1970s: Cause and effect analysis, Government Decisions, Fiscal and Monetary policies
  • Unemployment and inflation: Effects on aggregate demand and supply, relation between unemployment and inflation
  • GDP and Income: 4 components of GDP, Concept of Value Added, Nominal and real growth, Price Index, National Income, Disposable Income, Consumption and Savings
  • How does GDP Grow?: Analysis of the growth stories of Japan, China and Singapore
  • Investments and Interest Rates: Expectation, Revenue and Costs, why do interest rates change, Controls on Money Supply
  • 2008 Global Economic Recession: Root causes demystified, effects of recession and interplay of macro-economic factors
  • Balance of Payments: Current account and capital account transactions broken down
  • Foreign Exchange Rates: Purchasing Power Parity, determinants of real exchange rates, connection of Oil Prices and exchange rates
  • The bigger picture: Why spike in oil prices are followed by recession and how does everything connect.

You, This Course and Us

You, This Course and Us

Recession of 1970's

Inheritance of troubled Economy

The late 1970's were a tough time for US and UK. High inflation, unemployment and interest rates prevailed. Soon followed the parliamentary elections toppling the existing parties of power.

Unemployment and the story of Sam

Unemployment is closely affected by various macro-economic triggers. Economist pool unemployment into 4 broad categories. Inflation leaves a deep mark on the unemployment levels because of shift in aggregate demand in the Economy.

Inflation demystified

Inflation is a period of rising prices and the value of money reduces. A change in price is a change in the factors affecting demand and supply which are assumed to be constant. This brings about a change in aggregate demand and aggregate supply in the economy.

Unemployment and inflation connect into Stagflation

There are two types of inflation, i.e. demand pull and cost push, one being better for the economy than other. Both have very varied effects on the economy.

Taxes and Deficit Financing

President Reagan formulated the action plan to bring USA out of the turmoil. Arguably the best of his action was the tax cuts which shifted the money flow to more productive activities. He accompanied tax cuts with deficit financing.

Monetary Policy and controlling Money Supply

Money supply, i.e. quantum of money available to people is regulated by the Central Bank through the Monetary Policy. Monetary Policy dictate the interest rates. Too much money available with the people can go into unwanted activities like speculation and can lead to inflation.

Gross Domestic Product

Components of GDP in Minion Land

The Gross Domestic Product or GDP is the function of consumption, investments, Government spending and imports and exports of the entire economy taken as a whole. All four have different bearings on the Economic activities and influence the decisions taken at the parliament and the Central Bank.

Real, Nominal GDP and the Price Index

Only prices of FINAL goods and services are taken into GDP. Prices impact GDP but what matters most is fixed prices without impact of inflationary trends. The only GDP that matters is the Real GDP and not Nominal GDP.

Income and the connection of Savings and Consumption

The Per Capita income gives the indication of well being of the citizens. The Disposable income at the aggregate level tells us how much money is available with the people in the Economy either to spend on consumption or put into savings to be used by industries for productive purposes. This is Investments.

The GDP Growth Stories

The Story of the miraculous Japanese Growth

Japan is the third largest economy in the world in terms of nominal GDP and world's largest creditor. Japan achieved all of these due to the regulatory reforms in 1960s to 1980s. This period is called the Japanese Post War Economic Miracle coming right after the World War II. The GDP growth story of Japan is worth studying.

The Exponential Growth of China decoded

China emerged as a manufacturing powerhouse starting from late 1970s. China's economic growth rates are astonishing coming from a fact that prior to 1970s China was a heavily inefficient communist economy. Yet another growth story worth analysing.

The success story of friendly Singapore

Singapore's economic success is equally surprising given the fact that the country had high levels of unemployment and poverty in the 1960s and lacks natural resources. Today Singapore is the one of the richest economies in the world known for social harmony. A must-know growth story for sure.

Supply of Money

Central Bank's tool kit for controlling money supply

Central Bank controls the supply of money in order to put the Economy in the first gear in GDP growth. The money supply controls inflation, influences investment and savings, reduces unemployment and most importantly puts money into productive purposes.

The sub-prime mortgages and CDO

Most powerful tool with Central Bank to control money supply was the Federal Discount Rate. The starting point of the Global Economic recession of 2008 was the astonishingly low Fed discount rate coupled with relaxed regulations. Many new financial instruments surfaced in the US economy like the Sub-Prime Mortgages and the Collateralised Debt Obligation.

The burst: 2008 Global Economic Recession

The Global Recession of 2008 was the fallout of loans given to borrowers without basic background check. Once the interest rates were hiked, all of these borrowers defaulted and that was the sharp pin which pierced all the housing bubbles.

Balance of Payments

Current Account Transactions

The Balance of Payments is the statement of account for the transactions between residents of the country. It has two legs, i.e. Current account and capital account. The Current account transactions include broadly 4 categories all of which have no future rights or obligations.

Capital Account Transactions

Capital Account transactions in the balance of payments are those which have future rights or obligations again having 4 broad categories. It is these transactions that try to balance out the current account transactions and the net of these two determine a companies deficit or credit position.

Foreign Exchange Rates and Oil Prices

Foreign Exchange rates, basket of goods and Purchasing Power Parity

Price of one currency in terms of another gives the Foreign exchange rate, the catalyst for international trades. They are determined through forces of demand and supply but a major determinant is the Purchasing Power Parity. US dollars should be able to purchase equal quantity of similar goods from anywhere in the world.

PPP different from Real Exchange Rates

The Purchasing Power Parity implied rates are different from the real exchange rates due to transportation costs, trade barriers, etc. Prices impact foreign exchange rates and inflation impacts prices. Inflation can appreciate or depreciate foreign exchange rate.

Oil and the repercussions of change in prices

Oil, a scarce but extremely useful resource, divides the world into two: Oil importing and Oil exporting. The trade of oil influences the exchange rates of almost all countries in the world. The impact on oil importing countries differs depending on whether a country is heavily export oriented or not.

Everything connected

Every macro-economic variable has an impact on every other variable. The connections between all the factors are a must-know to understand the big picture of what is going on in the economic front.

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Case Studies in Macro Economics
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