Macroeconomic Dynamics & Growth

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Abstractions about aggregate demand, growth, business cycles, unemployment, fiscal effects, structural transformation, and equilibrium in macroeconomic models.

17 abstractions in this family — domain-specific abstractions that sit near one another in structural-signature space (k-means over structural-signature embeddings). Each is shown with its short description.

• AD–AS Model — The workhorse macroeconomic framework that plots the economy as the intersection of an aggregate-demand and an aggregate-supply schedule in price-level × output space, reading disturbances as curve shifts and diagnosing their source from a four-quadrant typology.
• Aggregate Demand — The total planned expenditure on final goods and services at a given price level, summed as C + I + G + (X − M) and matched against aggregate supply to set short-run output and the price level.
• Business Cycle — Read the joint state of a whole economy off one phase label on an ordered ring — expansion, peak, contraction, trough, recovery — by tracking position relative to trend and direction of motion rather than the absolute level of activity.
• Capital Accumulation — Track an economy's whole productive base as one state variable growing under the law of motion ΔK = I − δK, a self-feeding loop of output-saving-investment that diminishing returns brake into a steady state where thrift raises the level but not the long-run growth rate.
• Crowding In — The macroeconomic pattern in which public expenditure raises rather than displaces private investment — the sign reversal of crowding out — obtained when the economy has slack and the public input complements private activity, through a demand channel or a complementarity channel.
• Feldstein-Horioka Puzzle — The anomaly that national saving and investment rates are strongly correlated across countries when frictionless capital mobility predicts near-zero — turning the regression slope into a continuous gauge of de facto capital-market integration.
• Fiscal Multiplier — Compress a fiscal impulse's whole propagation cascade into one estimable ratio — the change in aggregate output over the change in government spending or taxation — driven by the marginal propensity to consume through induced rounds of income, less leakages and offset channels, and conditioned on regime.
• Harrod-Domar Model — Estimate an economy's sustainable growth rate as its savings rate divided by its capital-output ratio (g = s/v), giving a two-lever policy arithmetic and exposing a knife-edge equilibrium with no mechanism to return the economy to its warranted path.
• IS–LM model — A two-curve diagram fixing short-run equilibrium in a closed economy: the downward IS curve where the goods market clears and the upward LM curve where the money market clears cross at one point (r, Y) that pins down the interest rate and output jointly.
• Lucas Critique — Refuse to trust a macroeconometric model's historical coefficients for policy evaluation unless they are deep, regime-invariant parameters, because reduced-form relationships are themselves functions of the policy regime and shift the instant policy shifts.
• Natural Rate of Unemployment — The unemployment rate consistent with stable inflation in the long run — the frictional-plus-structural floor set by labour-market frictions and institutions, below which demand stimulus buys only accelerating inflation, never durable jobs.
• Paradox of Thrift — The macroeconomic result that a simultaneous, economy-wide rise in the desire to save lowers total saving in equilibrium, because the coordinated withdrawal of spending contracts demand and income until realized saving falls.
• Partial Equilibrium — The Marshallian method of isolating one market and solving its equilibrium price and quantity off supply and demand while holding the rest of the economy as fixed background — trading economy-wide feedbacks for tractability, valid only when the studied market is small and weakly connected.
• Phillips Curve — The short-run inverse relation between unemployment and inflation — positioned by expected inflation, sloped by how anchored those expectations are, vertical at the natural rate in the long run, and displaced by supply shocks — whose exploitable trade-off dissolves once agents come to expect the inflation.
• Say's Law (Supply Creates Its Own Demand) — The classical claim that aggregate production generates the income constituting aggregate demand, so a general glut cannot persist — a conditional resting on flexible market-clearing prices, no permanent hoarding, and a loanable-funds market that routes saving into investment.
• Structural Transformation — A sustained reallocation of an economy's employment, value added, or expenditure across broad sectors—classically away from agriculture, through a manufacturing rise, and toward services—as income, productivity, prices, and demand change.
• Unit-Economics Mirage — The error of judging a business viable from a rising aggregate metric — revenue, users, gross merchandise volume — while its fully-loaded per-unit economics are structurally negative, exposed by testing the contribution on the next unit rather than the average across existing ones.