Class 1: Introduction, Capitalist Revolution, Technology, Population and Growth

(Units 1 and 2 core)

Core-econ
Topics Key concepts Learning goals Practice exercises
unit
What is 1.1  Definition of economics  Evolution of definition of economics has
economics? evolved and a contemporary definition.
Living Standards 1.3;  Hockey stick growth  Rapid growth in living standards since late
in the last 1000 1.2  Introduction to GDP concept and brief 1700s
years discussion about limitations  GDP as measure of wellbeing
Economist’s 2.2  Data, model and narrative in  How economists use data, models and
toolbox economics; ceteris paribus. narrative to address questions
Malthusian Trap 2.7; 2.8;2.9  Production function; assumptions;  How increases in average product led to Calculating average product
technological improvement; average increases in living standards and population, from production function?
output; population growth; subsistence thus reducing average output.
income.
Industrial 2.4; 2.5; 2.6  Labour/Capital intensive technologies;  Represent different technologies in a diagram; Sketch iso-costs; changes in
Revolution and Dominated technologies; Iso-cost line;  Draw and interpret iso-costs wage-capital ratio
the escape Wage-capital-ratio; Creative destruction  Impact of changes in wage-capital ratio;
 How fast paced technological progress
lowered production costs and increased living
standards.

Class 2: Scarcity, Work and Progress

(Unit 3 core)

Core-econ
Topics Key concepts Learning goals Practice exercises
unit
Choices between Intro 3  Introduction to model of individual  Understand work time has reduced overtime
leisure and work choice over work and free time:  and that countries with similar GDPs have very
time, differences restrictions vs wants different work/leisure times;
over time and  Two sides of model of consumption/free time:
countries restriction vs wants.
What can 3.1; 3.3; 3.4  Production function with a single-input;  Draw production function that turns study time Plot production function,
individuals do?  Marginal and average product (analytical into grade (increasing and concave) calculate marginal and
and geometric)
  Opportunity cost and economic rent  Calculate, distinguish and relate marginal and average product (geometric
 From the production function to the average product. interpretation)
feasibility frontier (FF) and set  Distinguish opportunity cost and accounting Opportunity cost and
 Marginal rate of transformation (MRT) costs economic rent
 Feasible and infeasible bundles. Plot Feasibility Frontier
 MRT as the opportunity cost of free time Compute and interpret MRT
(increasing with free time) – geometric
interpretation
What are 3.2  Indifference curves (IC) and indifference  Draw indifference map for imperfect substitutes Different preferences and
individuals willing maps  Distinguish between satisfaction with bundled different indifference maps
to do?  Relation of weak and strict preference along the same and different IC Calculate and interpret MRS
and indifference between bundles  Calculate MRS (decreasing with free time) –
 Marginal Rate of Substitution (MRS) geometric interpretation
 Assumptions about preferences and
implications on indifference maps
Finding the 3.5  Putting FF and IC together.  Interpret the equilibrium geometrically Find equilibrium; interpret
equilibrium in the  Equilibrium when MRS=MRT (tangency (tangency condition) and conceptually (vs. why some bundles cannot
consumption- condition) MRS>MRT and vice-versa) be equilibria (focus on
leisure model geometric interpretation)
Shocks to the FF 3.6  Economic shocks – technological shocks  Understand how technological shock changes Rotation of linear budget set
and changes in and shifts in production function production function and feasibility frontier; and differences in leisure
equilibrium  Consumer-worker model – linear budget  Previous equilibrium no longer satisfies time (focus on total effect;
constraint (MRT=wage) MRS=MRT intuitive explanation of
 Change in wage as a shock  Finding new equilibrium income and substitution
 Changes in equilibrium in face of  Show final equilibrium may entail more or less effect))
economic shocks leisure time due to different preferences
 .
Application of the 3.9;3.10  Differences in the same country over time –
model to explain income effect dominates in the US
differences in  Differences across country – mix between
leisure/work time different budget sets and which effect
dominates
Is the model 3.8  Shortcomings and advantages of the
realistic? consumption-leisure model

Comment: For humanities students remove assumptions about indifference curves

Class 3: Strategy, Altruism and Cooperation
(Unit 4 core)

Core-econ
Topics Key concepts Learning goals Practice exercises
unit
Deciding in the Intro 4; 4.1  Social interaction; social dilemma;  Understand that in some circumstances
context of social selfishness, tragedy of the commons outcomes of actions depend on the actions of
interactions  Strategic interaction; Game; Player; other players;
Strategy; Payoff; Equilibrium.  Basic concepts of game theory and how it
may help study such cases.
Equilibrium in 4.2  Simultaneous games with no repetition  How to represent static games in a double Represent games from text
Static Games or coordination; entry table description;
 Best response, Dominant and  How to find best responses, dominant and Solve static games
Dominated Strategy, Nash Equilibrium dominated strategies
 Finding equilibrium (unique or not)
Prisoner’s Dilema 4.3; 4.4:4.5  Prisoner’s dilemma  Understand set-up of prisoner’s dilemma and Solve prisoner’s dilemma
how it may lead to suboptimal outcomes
 Understand why this outcome may occur and
how we can mitigate it
Attaining better 4.4, 4.5  Social preferences; altruism;  How introducing social preferences (altruism)
social outcomes:  Zero-sum game may improve the outcome of the game.
altruism  Indifference curves for selfish and
altruist players.
Attaining better 4.6,4.7  Repeated games  In one-shot public game dominant strategy is
social outcomes:  Public good games, free riding, not to contribute
repeated games reciprocity, peer-punishment  Repetition does not seem to raise
contributions
 Introducing punishment may increase
contributions
Attaining better 4.9;4.10  Sequential/dynamic games  Distinguish sequential from repeated static
social outcomes:  Ultimatum game games;
negotiation  Understand ultimatum game may have many
outcomes, depending on preferences and that
negotiation may improve upon the outcome.
Games with more 4.13; 5.2  Existence of multiple Nash equilibria  Illustrate how multiple equilibria can arise in Game with two equilibria
than one  Pareto Efficiency; Pareto Dominance the context of static games;
solution, criteria  Understand than in such cases, some
equilibria may be more desirable
 to judge best  Discuss how we can use criteria, such as
solutions Pareto Efficiency to judge the solutions of a
game.

Class 4: Owners, Managers and Firms

(Unit 6 core)

Core-econ
Topics Key concepts Learning goals Practice exercises
unit
Firms, owners, 6.1  Firm, Owner, Manager, Worker,  Understand how different actors interact
managers and asymmetric information within the firm
workers  Identify cases where asymmetric information
arises.
Owners vs. 6.2  Profit vs. Revenue maximization  Difference between the goal of the owner and
Managers  Conflict of interests manager
 Understand how conflicts of interest may
arise due to different goals.
Workers 6.3  Incomplete contracts  Relate uncertainty about the future and
 Measurement issues measurement issues as two sources of
 Effort, piece rates and incentives to incomplete contracts
work.  Understand why it is difficult to measure
effort and how firms may induce it
 Provide examples of workers’ intrinsic
motivation for workers
Employment 6.4; 6.5  Employment rent; cost of job loss;  Employment rent as the cost of job loss; Calculate employment rents
rents  Reservation wage; Disutility of effort;  Understand how wage, disutility from work and whether worker prefers
Unemployment Benefits. and unemployment spell length affect to keep job or not
employment rents;
 Calculate employment rents.
Labour discipline 6.6, 6.7  Workers as supply and firms as demand  Represent worker’s best responses in the Plot best responses of
model in labour market; wage x effort diagram workers, feasible
 Workers’ best response (Feasibility set  Interpret the slope of best response as MRT; combinations of effort-
and Frontier, MRT)  Distinguish feasible and unfeasible wage, interpret MRS
 Profits, Iso-cost (MRS) combinations of effort and wage and the role Plot iso-costs, interpret MRT
 Equilibrium as tangency between of the reservation wage; Find equilibrium graphically
worker’s best response and lowest iso-  Understand how effort affects profits of the Impact of shocks on best
cost firm and costs; responses and equilibrium.
  Involuntary unemployment  Represent iso-cost map in the wage x effort
diagram
 Interpret the slope of the iso-cost as MRS
 Represent the equilibrium of labour discipline
model as the intersection of lowest iso-cost
and worker’s best response (tangency
condition)
 Understand involuntary unemployment is a
necessary feature of the model
 Understand the effect of shocks in the model,
represent graphically and study the impact on
the equilibrium.
Principal and 6.10  Principal, agent, agency relation  Characteristics of incomplete contracts;
agents models:  Hidden action problem  Agency relation as a relation between
discussion principal and agent where conflicting self-
interests may arise. Examples.

Class 5: The firm and its customers

(Unit 7 core)

Core-econ
Topics Key concepts Learning goals Practice exercises
unit
Firms as profit Intro 7  Profit, revenue, cost, consumer demand  Relate size of the firm with its success and
maximizing profitability as a measure
entities  Understand firms maximize profits bounded
by the consumer demand
Costs 7.3  Total, Marginal and Average costs  Distinguish between marginal and average Plot total, marginal and
 Fixed and Variable Costs cost average costs
 Profit per unit (using AC)  Relation between monotonicity of AC and MC Calculate marginal and
cost curve average costs from table
(functions?)
Revenue and 7.4, 7.8  Demand function; Willingness to Pay  Represent WTP with the demand function and Simple demand function
Demand (WTP) negative relation between prices and exercise;
 Slope of demand as MRT quantities demanded (slope as MRT) Distinguish demand and
 Revenue function, Marginal Revenue  Compute marginal revenue from revenue inverse demand functions
 Price elasticity of demand (PED) function/values
  Understand how consumer demand restricts Calculating PED and
revenues, specifically that increasing understand how they
quantities may increase or decrease revenues, condition marginal revenue
due to price effect
 Calculate and interpret PED
 Understand how PED varies along a linear
demand curve
Profits and Iso- 7.4  Iso-profit curves  Understand iso-profits represent different Calculating average product
profit curves  Slope of iso-profit as MRS combinations of price and quantity that from production function?
 Zero-profit Iso-profit and AC  Represent (convex) iso-profit curves in the
price x quantity diagram
 Understand iso-profits further away from the
origin are associated to higher profits. (zero
profits at iso-profit that coincides with AC
curve).
 Derive the slope of iso-profits
 Interpret the slope of iso-profits as MRS
Profit 7.5, 7.6  Profit maximization constrained to  Interpret profit-maximization as a constrained Put iso-profits and demand
maximization and market demand optimization problem together and find
equilibrium  MRS=MRT  Understand dual perspective for optimization: equilibrium
quantity and  Markup MRS=MRT (tangency condition) and MR=MC. Discuss why higher or lower
price  Markup as a measure of the market power of prices cannot be an
the firm equilibrium
Gains from trade, 7.7; 8.5  Willingness to pay (WTP) and accept  Understand how markets generate gains from Sketch demand and supply
market power a (WTA) trade (differences between WTP, WTA and function, represent CS, PS
deadweight loss  Gains from trade: Total, Consumer and market price). and TS.
Producer Surpluses (TS, CS, PS);  Represent CS, PS and TS in competitive Represent DWL
 Benchmark case: competitive markets markets and monopoly (calculate graphically). Elastic vs inelastic demands
[to be developed next class]  Understand monopoly implies unexploited (question 7.15 core)
 Deadweight loss (DWL) gains from trade, which can be measured by
DWL.
 Explain how markup depends on price
elasticity of demand.
 And how markup defines size of DWL.
Price elasticity, 7.10; 7.11  Competition; Monoply;  Relation between competition and market
Profits and Policy  Innovation and advertising power;
 Relation between innovation, advertising and
market power
Comment: For humanities students: Remove Elasticity and equations with the slope of iso-profits (stick to MRS=MRT) Remove MR=MC?

Class 6: Supply and Demand – Price-taking and competitive markets

(Unit 8)

Core-econ
Topics Key concepts Learning goals Practice exercises
unit
Introduction to Intro 8  Price-taking firms  Understand competition induces price-taking
price-taking firms behavior;
 Perfect competition as benchmark where no
firm has market power.
Supply and 8.1  Market Demand and supply functions  Shape of demand and supply, negative and Draw and manipulate
Demand  Willingness to pay (WTP) and accept positive relation with prices demand and supply function
(WTA)  Demand as measure of WTP;
 Firm’s reservation price  Supply as measure of WTA
 Reservation price as limit for individual firms
to participate in the market
Market 8.2  Competitive market equilibrium  Equilibrium as intersection between market Find equilibrium from
equilibrium  Excess supply and demand. demand and supply demand and supply
 Equilibrium price and quantiy that clear the functions
market Represent excess demand
 Show different prices would generate excess and supply graphically
supply or demand.
Profit 8.3  Identical products and competition  Equilibrium as intersection between highest Calculating average product
maximization in  Market vs. Firm demand curve iso-profit and individual demand function from production function?
competitive  Individual firm supply function (MRS=MRT)
markets  Equilibrium as P=MC
 FCSS: analytical equilibrium (comparison
between Competitive and Price-setting firms
 Understand there is no incentive to deviate
from equilibrium for any firm
 Marginal cost curve as the individual supply
function
Market supply 8.4, 8.5  Identical firms, Aggregate supply  Understand how to obtain the aggregate Find aggregate supply com
function and function supply function from the individual supplies individual supply of identical
competitive firms
 equilibrium  Consumer (CS), Producer (PS) and Total  Market equilibrium as intersection of
revisited. Gains (TS) Surplus aggregate supply with demand function Calculate CS, PS and TS, as
from trade  Main assumptions of competitive markets areas from graph (example
 Understand how markets generate gains from where CS different from PS
trade (differences between WTP, WTA and to discuss fairness)
market price).
 Represent CS, PS and TS in competitive
markets and monopoly (calculate graphically).
 Competitive market equilibrium as reference
for pareto efficiency
 Pareto efficient equilibrium does not ensure
fairness
Shocks to supply 8.6  Economic shocks: examples  Understand the impact of different shocks on Demand and supply changes
and demand and supply and demand (shift of the curves in from shock
changes in different directions) Should students be able to
equilibrium  Re-calculate new equilibrium, compare to build new functions from
initial one shock info? No for
humanities.
Finding new equilibrium
Taxation and 8.7  Taxes, sales taxes  Understand sales taxes affect equilibrium and Impact of tax on
market  Government Revenue, Deadweight Loss generate a DWL equilibrium, CS, PS.
distortions  Government Revenue obtained as a result of Find Government Revenue
Consumer Surplus and Producer Surplus and DWL
reduction
 Reduction in equilibrium quantity may be
intended (green taxes)
Model of perfect 8.8  Identical goods; large number of firms  Understand the characteristics of perfectly
competition and consumers; Barriers to entry, competitive markets
perfect information  Discuss how they are an ideal (benchmark)
 Law of one price case
Price takers vs. 8.10   Comparison outlining main differences
Price Makers between price-taking and price-making firms

Class 7: Markets, Efficiency and Public Policy

(Unit 12 core)
 Core-econ
Topics Key concepts Learning goals Practice exercises
unit
Markets and Intro 12  Market failure; Imperfect competition;  Understand concept of market failure;
efficiency Externality, Public Goods; Imperfect  Departing from Imperfect competition,
information and missing markets; Social discuss other types of market failures and
norms their basic definitions (to be developed along
the class)
Imperfect 7.7;7.12   Retrieve DWL graph from previous class and
competition discuss market power as a source of market
failure
 Possible solutions: price discrimination and
regulation (not to be developed)
Externalities 12.1; 12.4  Positive and negative externalities  Identify examples of positive and negative Graphical example to
 Marginal private cost (MPC), Marginal externalities. distinguish and measure
external cost (MEC), Marginal social  Understand the relation between MPC, MEC, MPC, MEC, MSC
cost (MSC) MSC and the need to intervene when MEC>0 Example with basic linear
 Incomplete contracts  Plot the MPC, MEC, MSC (basic assumptions functions
and relation between the curves) in the
quantity x costs diagram
 Understand that in absence of intervention,
firms decide when P=MC, which may lead to
external costs to the society, and that the goal
is not to eliminate external cost, but to
internalize it.
 Incomplete contracts as sources of
externalities, the role of property right and
possible solutions (bargaining, government
policy)
Externalities:: 12.2  Property rights  Understand how assigning property rights and Graphical example to clarify
Property rights  Bargaining; Transaction costs. allowing bargaining may be a way to improve Minimum acceptable offer
and bargaining incomplete contracts; and reservation option
 Discuss how, if transaction costs are
negligible, the side to which property rights
are assigned is irrelevant.
 Understand limitations of bargaining.
Externalities: 12.3  Regulation, Pigouvian taxes, enforced  Production quotas as limits to output that Exercise to discuss the
Government compensation reduce quantity (ideally) to socially desirable different options of
policy  Production quota optimum (difficulty to determine and enforce) government intervention
  Understand Pigouvian taxes increase MPC,
ideally to equate MSC (in that case induces
pareto efficient quantity), generating tax
revenue that may be distributed.
 Enforced compensation as a tool to force
those that are imposing the cost to
compensate the other (compensation goes
directly to affected parties rather than to the
government).
 Understand limitations of government policies
in mitigating externalities.
 Application to climate change (understand
policies in the EU and the difficulty to
compute MEC)
Imperfect 12.6;12.7  Asymmetric information; Hidden action  Distinguish between Hidden action and Exercise to identify hidden
information (Moral Hazard); Hidden attributes attributes (with examples) action vs attributes
(Adverse selection); Missing Market  Identify the sources of asymmetric
information and how this may lead to missing
markets (insurance and banking)
Public goods 12.5  Public good; non-rival; non-excludable ;  Classify goods according to their rival and Exercise to classify goods
 Private goods ; Public goods artificially excludable nature. Purely public good as non- according to
scarce; Public goods and bads; excludable and non-rival rivalry/excludability (e.g
Common-pool resources  Understand how markets may fail when 12.7)
providing public goods (non-rival goods have
MC=0) and non-excludable goods have no
price
Limits to markets 12.8  Repugnant markets; Merit goods  Understand that markets may deliver Pareto
efficient allocations, in some cases with the
help of the tools discussed above to correct
for externalities
 Identify cases where markets may crowd out
norms of social preferences (e.g. repugnant
markets and merit goods)

Comment: this class is a bit heavy on concepts, but it is not obvious to me what to cut (easier on models).

Class 8: The labour market

(Unit 9 core)

Core-econ
Topics Key concepts Learning goals Practice exercises
unit
Labour market: Intro 9   Understand motivation for the unit: study
wages and how wage and (involuntary) unemployment
unemployment are related.
Measuring 9.2  Unemployed; Unemployment rate  Distinguish between different concepts of Exercise to compute
unemployment  Population of working age; Labour different measures of labour market related unemployment,
force/ Active population; Participation indicators participation and
rate; Employment rate.  Calculate unemployment; Participation and employment rates based on
Employment rate data
 Understand that different countries have very
different labour market indicators
Introduction to 9.1, 9.4  Price-setting and wage setting curve;  Connection to previous units (Firms and
aggregate labour  Real wage. employees, class 4; Firms with costumers,
market model class 5/6) to introduce the concepts of price-
/wage-setting curves.
 Distinguish between real and nominal wage,
and the importance of the former.
 Understand differences in the evolution of
real wages/hour in different countries.
 Describe how different departments within
each firm decide norminal wages, prices and
quantities of output and the number of
employees, and how those compounds into
equilibrium wage and employment for the
whole economy.
Wage-setting 9.3  Wage-setting curve (WS)  Sketch and interpret the WS curve and labour Exercise about WS curve,
curve force line in the real wage x interpretation and
employment/labour force diagram movements along the curve
 Understand the positive slope of WS curve Graphical exercise to d
(positive relation between real wage an
employment/negative for unemployment–
validated empirically) and movements along
the curve
 Derive the WS curve from the labour-
discipline model (different best responses
 from workers require different equilibrium
wages that originate different points of the
WS curve.
Price-setting 9.4, 9.5  Markup (unitary profit), unitary cost  Understand how profit-maximizing induces a Exercise about PS curve and
curve  Average product of labour, split of price above marginal cost which equates to how changes in the average
returns from firm’s activity between the markup of the firm (simplified model with output or competition may
workers (wages) and firms (profits) labour as only input) lead to shifts of the PS curve
 Price-setting curve (PS)  Interpret price of output as a sum of unitary
profit (markup) + unitary costs (wages)
 Sketch and interpret the PS curve in the real
wage x employment/labour force diagram
 Understand the WS curve is horizontal
because it stems from individual firm’s
decisions and is not affected by aggregate
unemployment
 Understand PS curve is below average product
line and its level is determined by competition
(markup) and identifies the split of returns
from firm’s activity between workers (wages)
and owners (profits).
 Show that higher or lower real wages are not
sustainable and converge to point along the
PS curve.
Equilibrium in the 9.6, 9.7, 9.9  Demand-deficient unemployment; self-  Finding equilibrium in the aggregate labour Exercise about equilibrium,
aggregate labour correcting unbalances in the labour market as the intersection between the WS interpretation as Nash
model market and PS curve. equilibrium
 Discuss how equilbrlum is a Nash equilibrium Discussion about impacts of
(no incentive to deviate) demand deficient
 Characterize involuntary unemployment unemployment.
(excess supply in the labour market) as an
unavoidable feature of the equilibrium.
 Represent demand-deficient unemployment
shocks in the diagram and describe self-
correcting mechanism implied by the model
 Understand the potential hindrances of self-
correcting mechanism and how government
policy may help (expansionary policy, to be
developed later)
  Describe the impacts of changes in labour
supply (the case of immigration)
The role of labour 9.10  Labour unions, bargaining power,  Understand inequality between split of gains
unions unionized employees; from firms’ activity may be associated to
 Union voice effect social unrest;
 Labour unions as part of the bargaining
process to increases wages (differences in the
penetration of unionization across countries)
 In theory, labour unions should be able to
increase wages but also lower
unemployment, however this prediction is not
empirically validated
 Understand one possible explanation is the
union-voice effect
Labour market 9.11   Understand how different policies lead to Exercises with policy shocks
policies changes in the curves and the equilibrium. (which curve changes and in
which direction)
 

Comment: dropped inequality (we did not introduce gini), just keep it as introduction to labour unions.

Class 9: Banks, Money and Credit Market

(Unit 10 core)

Core-econ
Topics Key concepts Learning goals Practice exercises
unit
Income, wealth 10.1, 10.2,  Wealth; Income; Earnings; Net income;  Distinguish basic concepts relater to money Exercise to distinguish
borrowing and 10.5 gross (post-tax) income; depreciation; and credit markets concepts related to income
saving Savings, Investment  Understand borrowing and saving as shifting and wealth
 Borrowing; Saving; Lending; consumption in time (connection with
expectations about future income; opportunity costs and interest rates)
interest rate
Modelling 10.2; 10.3;  Feasibility set (MRT), interest rate,  Borrowing as a situation where there is no Exercise to build feasibility
Borrowing 10.4 endowment income today and there will be tomorrow set for borrowing consumer
 Consumption smoothing; impatience; (bring consumption to the present) (graphical and analytical)
Myopia; Prudence; Discount rate (MRS) Exercise to find equilibrium
in the borrowing model
  Feasibility set in the borrowing model: (graphical). Shocks (changes
equation, sketch graph in the consumption interest rate) to equilibrium.
now x later diagram
 Relate slope of feasibility set with MRT
 Understand how changes in interest rate
affect feasibility set
 Represent preferences over consumption
today and tomorrow (role of consumption
smoothing and impatience (myopia and
prudence)
 Understand how discount rate affects shape
of Indifference curves and MRS
 Find equilibrium as MRS=MRT (or discount
rate equal to interest rate), including
geometrical interpretation (tangency
condition).
 Show points other than the tangency point
are not an equilibrium (discrepancies
between discount and interest rate).
 Model shocks (changes in interest rate) as
changes in the feasibility set and understand
how that affects equilibrium.
Modelling lending 10.5  Lending vs storing  Lending as a situation where there is no Exercise to build feasibility
 Reservation indifference curve income tomorrow but there is income today set for lending consumer
(postpone consumption to the future) (graphical and analytical)
 Understand how we can adapt the previous Exercise to find equilibrium
model to study lending/saving (lending in the lending model
expands the feasibility set tomorrow). (graphical). Shocks (changes
 Represent the borrowing model in the interest rate) to equilibrium.
consumption now x consumption later
diagram and find equilibrium using consumer
preferences (MRS=MRT)
 Model shocks (changes in interest rate) as
changes in the feasibility set and understand
how that affects the equilibrium.
 Understand how the reservation different
curves depend on whether you are a
borrower or lender.
Modeling 10.6  Investment, return on investment  Understand investment as another way to Changes in the feasibly set
investment shift consumption into the future if you have from investment and
income today. investment and borrowing
 Represent investment as possibility to expand (graphical)
feasibility set tomorrow than with no
investment (with higher return than lending).
 Finding equilibrium graphically (tangency
condition)
 Understand how borrowing and investment
can be combined to expand feasibility set
even further (graphical equilibrium/tangency
condition)
Individual’s 10.7  Assets, Liabilities and net worth  Understand how the relation between Assets Short exercise on
balance sheet  and Liabilities determines (positive and borrowing/lending and
negative) net worth. impact on assets, liabilities
 Understand that borrowing and lending do and net worth
not change net worth.
Banks and money 10.8  Commercial bank; Central bank;  Distinguish between central bank and
 Bsse money/high powered money; legal commercial banks. The former only interact
tender; liquidity provision with commercial banks; the later with
 Bank money; Loan costumers.
 Broad money  Understand the role of the central bank as
 Maturity transformation and liquidity issuer of base money to be used as legal
transformation; Banking crises (default tender (role as government body).
and liquidity risk), bank runs and  Understand role of commercial banks as
systemic risk. creating bank money through loans
 Broad money as base + bank money.
 Commercial banks as agents that engage in
maturity and liquidity transformation.
 Default and liquidity risk and banking
crises/runs.
Money Market 10.9  Demand and supply of base money  Identify who is responsible for demand and
 Policy vs bank lending rate supply of base money
 Distinguish policy and bank lending rate.
 Describe the flow of the financial systema and
how commercial and central banks interact
through the money market.
 The Business of 10.10  Commercial banks bank sheet  Describe main items of cost and revenue
Banks  Lending restriction; diversification (of structure of commercial banks
activity and revenue)  Understand how banks’ revenues are affected
 Insolvency; Leverage. by uncertainty and how banks mitigate this
(lending restrictions, higher interest rates,
diversification)
 Understand the differences in assets and
liabilities for banks (vs consumers/firms)
 Evaluate banks’ net worth and financial
indicators (e.g. Leverage) of bank financial
health.
Central Banks and 10.11  Credit rationing  Recall banking as a principal-agent problem
the Economy  Equity requirements, collateral, with asymmetric information (there is the risk
personal guarantee that loans will not be repaid)
  Understand this may be mitigated by
requiring additional guarantees (equity,
collateral or personal)
 Those who cannot provide them tend to be
excluded from the banking market (credit
rationing)

Comment: removed reference to Gini. Shall we remove banks balance sheet, at least for humanities?.

Class 10: Economic Fluctuations and Unemployment

(Unit 13 core)

Core-econ
Topics Key concepts Learning goals Practice exercises
unit
Introduction to 13.1;13.2  Business cycles; Trend vs. Cycles  Distinguish between trend and economic Graphical exercise to
Business cycles  Expansion phases (booms); Recession cycles. illustrate phases of
phases (busts).  Identify phases of economic cycles (booms economic cycles (from levels
 Okun’s Law and Okun’s coefficient. and busts). to changes)
 Relation of GDP cycles and unemployment.
 Understand Okun’s Law and basic intuition
behind it.
Measuring the 13.3, 13.4  GDP; System of National Accounts;  Understand the simplified circular model Exercise to illustrate
aggregate Spending, Production and Income (diagram and equation) with 2 agents simplified circular flow (2
economy Approaches to determine GDP. (households and firms) agents) and compute GDP in
 Economic agents and simplified circular  Based on the relations between agents 3 approaches
flow model (Households and firms). understand equivalent ways to calculate GDP
 Government (Taxes and spending); (with numerical example) Finding GDP from the GDP
external sector (Imports and Exports)  GDP identity condition with 4 sector identity with 4 sectors.
 GDP components  Understand how the weight of each
 Measurement issues: assumptions, PPP, component varies across countries and how Application exercise with
digital products, non-market activities, different components exhibit different mismeasurement sources?
unpaid housework, shadow economy volatility.
 Describe sources of economic activity
mismeasurement using GDP.
Economic 13.5, 13.6  Positive and Negative shocks.  Understand shocks may differ, but they affect Exercise with basic lifetime
fluctuations and  Lifetime phases (before work, beginning both industrialized and agrarian economies consumption model and
consumption of work, promotion, retirement) and (examples) examples of how temporary
lifetime consumption plans  Distinguish between positive and negative and permanent shocks may
 Temporary vs. Permanent shocks shocks (examples) affect it.
 Credit constraints; Weakness of will.  Understand how consumers deal with sudden
(negative) shocks – self-insurance (savings)
and co-insurance (from society and
government), particularly important given
preference for consumption smoothing.
 Understand why co-insurance is less reliable
when a bad shock hits everyone at the same
time.
 Represent path of income and consumption
over lifetime (relation with borrowing, saving
and using up savings) – role of consumption
smoothing
 Temporary shocks having small or no effect on
long-run consumption (comparison with
permanent shocks) – role of expectations
 Understand consumption smoothing as a
stabilizing effect over the economy (avoids
larger fluctuations in C and Y)
  Give examples of factors that may limit ability
to smooth: credit constraints; weakness of
will,
Economic 13.7  Virtuous and Vicious circles  Understand when investing firms do not have Exercise with data about
fluctuations and  Industrial confidence indicators preferences for smoothing. investment vs GDP
investment (and  Investment as coordinated effort in the volatility?
other GDP society, role of Virtuous and Vicious circles
components) (example with static game) Classify policies as counter-
 Investment heavily affected by industrial or pro-cyclical depending on
confidence indicators (articles with examples) the policy and the phase of
 Understand investment volatility translates the cycle.
(and amplifies) GDP volatility
 Exports as depending mostly on the economic
cycle of trade partners; imports depend
mostly on domestic demand.
 Government may amplify of mitigate cycles,
depending on whether it conducts pro- or
counter- cyclical policy (only definitions, to be
developed later on)
Inflation: 13.8  Inflation  Understand Inflation also exhibits cycles,
fluctuations and typically positively correlated with GDP and
measurement negatively with unemployment.

Comment:.Eliminated discussion about inflation measurement to class 12 (left relation with GDP and unemployment fluctuations)

Class 11: Unemployment and Fiscal Policy

(Unit 14 core)

Core-econ
Topics Key concepts Learning goals Practice exercises
unit
Fiscal policy and Intro 14  Fiscal policy  Understand the main fiscal policy tools.
business cycles:  Government size.  Calculate indicator of government size,
introduction understand its stabilizing role and how it
reacts to shocks.
Basic aggregate 14.1; 14.2;  Aggregate demand components:  Understand how AD components relate to Exercise with autonomous
demand model 14.3; 14.4 Private consumption, Private GDP under spending approach and induced consumption
and the multiplier investment, Government and next  Represent aggregate consumption with a and autonomous investment
exports linear function of autonomous and induced (shocks)
 Autonomous and induced consumption consumption in the C x Y diagram (interpret
(Marginal Propensity to Consume – intercept and slope/MPC) Exercise with multiplier in 2
MPC – and Marginal Propensity to Save  MPS as the converse of MPC sector AD model
– MPS)  Understand MPC varies across people and
 Broad wealth, Target wealth. Debt, that expectation about future income are
Equity, Financial wealth, Expected reflected in autonomous consumption (role of
future earnings economic shocks – to expected earnings and
 Autonomous Investment, Owner’s home equity)
discount rate; Interest rate on assets;  Investment is assumed to be autonomous
Net profit on investment. (does not vary with output) and level depends
 Goods market equilibrium in two-sector on the relation between owner’s discount
AD model rate, interest rate on assets and net profit rate
 Multiplier effect of investment.
 Represent aggregate investment function in
the interest rate x investment diagram (shifts
– more important – and moves along the
curve)
 Represent the AD model with two sectors in
the AD x Y diagram. Understand how the
equilibrium is related to 45º line (existence
based on MPC<1)
 Understand how a shock in aggregate
investment shifts AD and leads to new
equilibrium where change in GDP may differ
from the size of the initial shock (multiplier
effect)
 Distinguish the cases where multiplier is
larger, equal or smaller than one
(determinants)
 Understand how consecutive shocks (using
the 1929 crisis as example) can deepen effects
of the shocks.
Expanded 14.5  Government Spending, income taxes  Understand the government enters the AD Complete previous exercise
aggregate (disposable income). model in 3 ways: autonomous government with government and
demand model  Exports and induced Imports; Marginal spending, income taxes (which affect induced external sector
and the multiplier Propensity to Import consumption), interest rates/corporate
 Leakages from the circular flow of taxes/business environment (which affect
income (MPC, income tax rate, autonomous investment).
propensity to import)  Understand external trade is affected by
 autonomous exports (positive sign) and
induced imports (negative sign), where
imports are proportional to income (marginal
propensity to import)
 Adapt the AD model to the four sectors,
identifying all the autonomous and induced
consumption
 Understand how leakages (MPC, income tax
rate, propensity to import) reduce the size of
the multiplier
Fiscal policy in 14.6;14.8  Discretionary fiscal policy changes vs.  Understand 4 ways in which government can Exercise with fiscal stimulus
the Aggregate Automatic stabilizers (taxes and intervene: discretionary policy changes and austerity in the
demand model unemployment benefits) (Government Spending; Other fiscal policy multiplier model
 Paradox of thrift (Fallacy of changes) and automatic stabilizers (income
composition) tax and unemployment benefits).
 Fiscal stimulus vs Austerity  Paradox of thrift as unintended consequence
 Government budget surplus, balance of increase in savings in face of a negative
and deficit (persistent vs. temporary shock.
deficits)  Represent a Fiscal stimulus (increase in
government spending) may help stabilize the
economy with the multiplier model (plot
initial shock and government reaction)
 Understand financial conditions of
government may limit ability to react
(persistent deficits and inability to further
increase spending in face of a negative shock)
and force austerity policy
 Represent the consequences of austerity in a
recession with the multiplier model.
 Multiplier in real 14.7  Rate of capacity utilization (crowding  Understand that in real life the multiplier
life out) depends on more than the leakages of the
 Reverse causality and endogeneity model.
(concepts and example)  Example of estimate of multiplier for italy
Government 14.8  Primary vs total budget deficit  Distinguish between primary and total budget
Finances  Outstanding government debt; deficit
Matured bonds, Price of bonds  Understand how a large stock of debt may
 Default risk perception; Sovereign debt increase default risk perceptions and
crisis; eventually lead to a sovereign debt crisis;
 Debt-to-GDP ratio  Debt-to-GDP ratio as a measure of
indebtedness relative to the size of the
economy and how ratio may reduce.
Aggregate 14.10  Medium vs. short run  Understand how we can look at aggregate
demand model unemployment from two perspectives: short-
and run (multiplier model) and medium-run
unemployment (labour market model)
 Fluctuations in AD lead to cyclical
unemployment and not changes in the wage
or price setting curves.

Comment: Dropped fiscal policy and rest of the world

Class 12: Inflation, Unemployment and Monetary Policy

(Unit 15 core)

Core-econ
Topics Key concepts Learning goals Practice exercises
unit
Inflation: 15.1  Inflation, Zero inflation, Deflation,  Understand and apply the formula to Exercise to calculate
Introduction Desinflation calculate inflation as a change in a price index. inflation from consumption
 Nominal vs. real rates: Real interest rate Example with simple goods basket. basket and real GDP growth
(Fisher equation) and Real wage growth  Distinguish between nominal and real rates or real wage growth
 Hyperinflation; deflationary spirals using the inflation rate (real interest rate and
 Real value of debt; menu costs real wage growth). Example with simple GDP
measure.
 Understand how we can use different indices
to measure inflation (CPI and GDP deflator -
concept only)
  Understand difficulty in measurement using
CPI methodology in Spain as an example
 Describe consequences of inflation: reduction
in purchasing power; real value of debt; high
inflation and uncertainty, changes in relative
prices and menu costs.
 Describe the main consequences of deflation:
consumption postponing; increases in real
debt burden
 Understand the value of 2% inflation as a
reference value
Causes of 15.2  Aggregate demand components:  Understand inflation is motivated by changes
inflation Private consumption, Private in relative bargaining power or workers and
investment, Government and next firms over claims on return on output
exports production.
 Impact of increases in bargaining power of
firms from less competition (long run)
 Impact of increases in bargaining power of the
workers from higher employment or labour
union power (long or short run)
Philips curve 15.2; 15.3;  Wage inflation  Understand how economic boom (high Exercise to illustrate how AD
15.4; 15.5  Philipps curve employment/low unemployment) may lead to shocks (positive and
 Bargaining gap higher prices (wage inflation). negative) translate to
 Document positive relation between movements along WS and
employment and inflation (Philips curve) the Phillips curve
 Identify the level of employment that (inflation/deflation)
guarantees price stability (zero inflation) and
how fluctuations around this employment
level may lead to inflation or deflation.
 Grasp intuition for this results frum the
aggregate labour model (identifying upward
and downward pressures on wages and
prices)
 Understand bargaining gap as a deviation in
the equilibrium of the aggregate labour
model. Describe how a short run shock in AD
leads to movements along the WS curve and
movements along the Phillips curve.
  Distinguish between positive and negative
bargaining gaps and how unbalances in
employment/unemployment are associated
to inflation (booms) or deflation (busts).
 Understand how policy makers choose
optimal inflation target based on the trade-off
between inflation and unemployment (refer
preferences, do not show graphs)
 Using data from the US, show strength of the
relation between inflation and employment
shifts overtime.
Changes in 15.6; 15.7  Expected inflation  Understand people (and policymakers) have Exercise with expectations,
inflation  Inflation-stabilizing rate an expectation about future inflation (for open bargaining gaps and
 Supply shocks simplicity given by inflation from the previous effect on current inflation
period) and that this will materialize, unless
there is an open bargaining gap.
 Actual inflation as the sum of expected
inflation plus the current bargaining gap
(illustrate graphically with aggregate labour
model and Phillips curve)
 Understand that higher then expected
inflation becomes the expectation for the next
year, but if the bargaining gap is still not close,
inflation will continue to rise (represent in the
inflation x years diagram)
 Inflation-stabilizing rate as the unemployment
rate that keeps inflation constant.
 Provide examples of supply shocks, and
understand how they can open a bargaining
gap, which if not closed, with lead to changes
in inflation. (example with the post-pandemic
inflation)
Monetary policy 15.8; 15.9  Policy interest rate, (base) money  Identify Central Bank’s key instruments for Exercise about transmission
supply Monetary Policy definition (policy interest mechanisms (particularly
 Flexible and fixed exchange rate rates, money supply changes, exchange rate policy to market interest
regimes changes, when fixed) rates)
 Understand exchange rates can be indirectly
affected by other policy instruments.
  Transmission channels of monetary  Understand monetary policy changes are Exercise about currency
policy changes via policy interest rate transmitted to the real economy because they appreciation/depreciation
changes. affect AD components and/or prices directly. and impact on AD and
 Exchange rate; currency appreciation  Identify the four transmission channels of inflation.
and depreciation monetary policy: market interest rates; asset
 prices; expectations/confidence and exchange
rate. (summary explanation of each of them)
 Understand how changes in exchange rate
affect exports and imports, and in turn AD.
Monetary policy 15.10  Demand shocks  Understand how demand shocks can be Exercise about
and the multiplier  Counter vs Pro-cyclical monetary policy addressed using monetary policy (interest countercyclical monetary
model  Central Bank credibility; zero-lower rate) changes. policy change and mix with
bound; quantitative easing; monetary  Acknowledge monetary policy changes in fiscal policy (shifts in the AD
policy autonomy creation to busts do not require increasing in face of a demand shock)
 Fiscal and Monetary policy mixes; government deficits
Stabilization costs  Understand limitations of monetary policy
changes: central bank credibility; zero-lower
bound; no monetary policy autonomy
 Understand and represent in the
AD/multiplier model the effects of a mixed
change in fiscal and monetary policies to
counteract a shock.
Discretionary 15.11  Discretionary policies; Inflation  Understand the difference between policy
policies vs targeting reaction (discretionary changes) and
Inflation targeting  Central Bank Independence committing to a rule (inflation targeting).
 Inflation targeting as a way to ensure central
bank independence, with positive impacts on
credibility perceptions.
 Empirical (negative) relation between central
bank independence and inflation rate levels in
the long run.
Other causes for 15.12  Capacity utilization  Understand that low unemployment and high
inflation and low inflation can co-exist in cases of high-capacity
unemployment utilization.
 While in the long-run firms may invest and
raise capacity (higher investment), in the
short run excess demand for output will boost
 output prices, which may turn to a wage-price
sspiral and lead to inflation.

Class 13: Technological Progress, Institutions, Unemployment and Living Standards in the Long run
(Unit 15 core)

Core-econ
Topics Key concepts Learning goals Practice exercises
unit
Unemployment Intro 16, 16.8  Long-run  Observe that although the industrial
and living revolution hit most of the rich countries, but
standards in the long-term trends in unemployment differ
long run: substantially across countries.
introduction  Spain as a particularly striking case
 Associate differences are associated to
institutional and policy differences (not
different technology levels)
 Comparing real wage growth and
unemployment long term trends
differentiates high (high wage growth/ low
unemployment) and low performing
countries.
Job creation and 16.2  Innovation rates and creative  Recall tech improvement allows for innovation Exercise to illustrate effect
unemployment destruction (from class 1) rents and capital goods accumulation, of technological progress on
 Capital goods accumulation particularly when production starts becoming production function,
 Capital intensity of production and more capital-intensive. average productivity of
average productivity of labour, APL  Illustrate this phenomenon using the labour and increases in
(from class 2) production function in the per worker output capital stock.
 Job destruction and creation; net x capital equipment diagram
employment change  Recall tech progress shifts production up,
increasing APL, offsetting diminishing
marginal returns of capital and increasing
profitability, which allows for innovation rents.
(empirical evidence of upward shifts of
production function)
 Understand empirical evidence suggests many
countries experienced long run net job
creation, even when production has become
more capital intensive.
 
Job Flows and the 16.3  Beveridge curve  Relate net job creation with booms (pro-
Beveridge curve  Job vacancy rate cyclical) and net job destruction with busts
 Labour market mismatch (counter-cyclical).
 Labour market reforms; Skill-based  Beveridge curve as the inverse relation
mismatch; Limited worker mobility between unemployment and job vacancy
rate. Recession associated to high
unemployment and low job vacancy rate,
converse for booms.
 Beveridge curves differ across countries and
time. Curves further away from the origin
suggest larger labour market mismatches.
 Understand labour market mismatch may be
reduced with labour market reforms (like in
Germany) or amplified due to skill-based
mismatch and limited worker mobility.
Long-run Labour 16.4; 16.5;  Long-run  Understand the key conceptual difference Exercise with different
Market Model: 16.7  Firm entry/exist: variable capital stock between short and long run is increased markups and changes in
Ingredients  Markup flexibility in the latter, due to the ability of number of firms
 Business environment; expropriation firms entering and leaving the market and the
risk possibility of changing capital stock.
 Long-run price-setting curve (LRPS)  Long-run employment depends on the way
institutions promote work and investment
incentives, and is characterized by an
equilibrium wage, employment and number
of firms.
 The number of firms is determined by the
profit (or markup) in the market: when
markup is above equilibrium, new firms enter,
and competition lowers the markup and in
turn the number of firms. Represent this self-
correcting mechanism in the markup x
number of firms diagram (decreasing line)
 Understand equilibrium profit/markup that
determines number of firms may change due
to contextual factors (e.g. improvement in
business environment)
  Understand the relation between real wage,
labour productivity, and different levels of
markup as the LRPS.
 Represent the LRPS curve in the real wage x
markup diagram as a decreasing line
 Represent the LRPS curve as a constant line in
the real wage x employment diagram
(different levels correspond to different
markups, employment level is not relevant)
Long-run Labour 15.8; 15.9  Adjustment gap; diffusion gap  Plot LR labour market model in the Real wage .Exercise departing from
Market Model:  x employment diagram (with Wage-setting initial LR equilibrium and
Equilibrium curve and LRPS curve, and LR equilibrium as convergence to a new LR
their intersection) equilibrium in face of a
 Show convergence to new LR equilibrium in shock (distinction between
face of positive technological shock: job creation in the short and
technological shock increases unemployment long run)
and profits of firms, which attracts new firms
to the market, increasing employment and
real wages (shift of LRPS).
 Understand that adjustment/diffusion gaps
justify that in face of a shock, there is job
destruction in the short run, which then self
corrects into maybe even job creation in the
long run.
 Understand that if, during the period of higher
unemployment, wage-setting curve shifts up
(e.g. labour unions pressure, increase in
reservation wage, greater disutility of effort,
etc), the gain in employment in the long-run
may be neutralized.
What is the long 16.7   Understand long-run is defined as set of )
run in real life? circumstances, and not according to a specific
timeline.
 Example of US labour market reaction to
opening to Chinese trade (mention, details on
core)
 The role of 16.8;16.9;  Inclusive trade unions; unemployment  Understand what distinguish high and low
institutions and 16.10; 16.11; insurance schemes; job placement performers (allow for higher shift in PS than
policies 16.12 services WS curve to reduce unemployment; policies
to induce fast adjustment)
 Institutions (inclusive labour unions) and
policies (well-designed unemployment
insurance; job placement services) may be
crucial (explore examples for different
countries in core, including Spain).
 Understand institutions and policies are not
static (examples in different countries)
 Changes in the economic structure of a
country, and other factors not included in the
model also play a role.

Comment:.removed impact of tech change on inequality discussion (link to core included)

Class 14: Economic Inequality

(Unit 19 core)

Core-econ
Topics Key concepts Learning goals Practice exercises
unit
Economic Intro 19;  Definition of inequality  Understand the broad concept of economic
inequality: 5.12  Occupy Wall Street movement inequality
introduction and  Distribution of income; Lorenz Curve;  Occupy Wall Street movement as a social
measurement Gini coefficient movement reflecting increasing concerns in
 Measurement: whole vs points of the inequality – “We are the 99%”.
distribution  Understand measurement of inequality is
about the distribution of resources (GDP per
capita not a good measure);
 Understand difference between complete
measures and those that focus in one point of
the distribution
 Relate the graph of the Lorenz curve with the
calculation of the Gini
Trends in 19.1  Income vs Wealth inequality  Distinguish between income and wealth
inequality  Market vs Disposable income inequality
(government redistribution)  Understand that wealth is more unequal than
 % of income/wealth held by the 1% market income, which is more unequal than
richer disposable income (government
 Inequality within and between redistribution).
countries  Differences in inequality across countries; and
 Elephant curve understand the changes in inequality in
income and wealth overtime
 Relate within country inequality increase with
changes in the distribution of new jobs
created
 Understand increase in inequality is
particularly driven by lower and middle
classes of rich countries
Types of 19.2  Categorical or group inequality;  Concept of ‘accident of birth’ and how some
inequality accidents of birth (citizenship, gender, people are born into groups for which
ethnicity, etc.) inequality is expected to be higher.
 Gender inequality; intergenerational  Understand the gap between female in male
inequality and mobility earnings persists even controlling for
education
 Understand inequality persists across
generations: children of poor families are
more likely to remain poor (same for rich)
 Low intergenerational mobility is positively
correlated with cross section inequality.
What is the ideal 19.3; 19.4  Ideal, estimated and actual inequality  Understand ideal, perceptions about
amount of  Support for redistribution inequality and actual inequality often differ.
inequality?   Perceptions about desired level of inequality
are affects by personal beliefs (categorical
inequality typically seen as unfair, based on
hard work or taking risks is more subjective)
 Model desired level inequality as the
equilibrium between feasible set of possible
combinations of income for the rich and the
poor (MRT) and social preferences about
inequality (MRS)

Explaining 19.5, 19.6,  Endowments, technologies and  Understand economic inequality as a
economic 19.7 institutions and policies difference in endowments that may be
inequality  Labour market segmentation (primary amplified or mitigated by technology,
vs. secondary labour market) institutions and policies; and may condition
 Automation; active labour market the evolution of these dimensions and their
policies impact on future inequality (rich influencing
politics)
 Understand inequality affects the balance of
power between lenders (rich) and borrowers
(poor) – principal agent problem
 Use the aggregate labour market model to
discuss how increases in worker productivity
(due to higher education levels) may lower
inequality (inward shift of Lorenz curve).
 Illustrate with the Lorenz curve how reducing
labour market segmentation might reduce
inequality.
 Understand the dual impact of automation on
inequality (in the SR increase in inequality; in
the LR it may end up reducing inequality if
incentives to investment lead to new job
creation) and how active labour market
policies may help in the transition.
Addressing unfair 19.8;19.10  Redistribution vs. pre-distribution  Reducing inequality through redistribution )
inequality policies; implies designing tax and transfer systems
 Progressive vs. regressive policies (including public good provision) to reduce
 Market income; Disposable Income; differences in market income.
Final Income (direct/indirect taxes; cash  Pre-distribution policies aim at affecting
transfers; public goods – targeted vs inequality before income is generated (change
non-targeted policies) endowments – provide examples).
 Understand each policy may be progressive
(reduces inequality) or regressive (increases
it) and that the mix of policies in place
conditions the redistributive ability of the
government.
 Compare inequality in market, disposable and
final income to assess efficiency of
government redistributive policies
Trends in market 19.9   Understand the drivers of changes in
income inequality inequality in 3 main periods: 1920-80 decline
in within-country inequality; 1980-2017
stable/increasing within-country inequality:
1995-2017 stable/decline in between-country
inequality.
Inequality and 19.11   For rich countries, there is no obvious relation
economic growth between inequality and GDP growth: many
countries have similar GDP growth rates with
very different inequality levels.
 For catch-up countries, there seems to be a
more negative relation: countries with lower
inequality experienced higher GDP growth
(South Korea and Taiwan) and those with
higher inequality often exhibit lower growth
(Latin America).
 Together, results suggest taxes and transfers
do not necessarily reduce incentive to work
hard/innovate, and that lower inequality
comes with increased trust, cooperation,
security and social peace.
A glimpse on -  Poverty: Absolute vs. Relative measures  Understand that there is substantial variation
poverty  People at risk of poverty or social in at-risk-poverty-rate within EU countries
exclusion (monetary poverty, material (measure already embodies differences in
deprivation, access to work) income levels)
 Understand that indicators incorporating
other dimensions (such as material
deprivation and labour intensity) also exhibit
substantial variation.