Context:Key propositions related to macroeconomics are enough to elevate macro-economic into the realm of the essential.
Key things to know about macroeconomics: based on Keynesian economics
Impact of a demand shock on output and employment: A strong negative shock to demand—a sudden decline, usually leads to a loss of output and employment.
Keeping nominal wages low is sticky (due to sociological reasons), and so employers do not lower wages with demands but resort to lay-offs (loss of employment).
It was true in the Great Depression, in the disinflation of the 1970s and 80s, and in the financial crisis following 2008.
Role of Central banks: which can offset demand shocks or even prevent them by engaging in complex financial transactions or simply print more currency to stabilize nominal demand.
Increased money supply leads to inflation: if central banks go crazy increasing money supply, the result will be high price inflation
Exception of it was in 2008 and 2009 when the US Federal Reserve paid interest on bank reserves. (decreasing the velocity of money)
Impact of Large non-monetary (rise in oil prices): can lead to depression or recession; Central banks can partially stabilize such shocks, but they cannot erase them.
Growing population is good for the economy: with other things held constant.
On government borrowings: high-return public investments will strengthen a country’s fiscal situation, even if financed by government borrowings.