A Concise Guide to Macroeconomics: What Managers, Executives, and Students Need to Know

by David A. Moss

Understanding the Ground Rules for the Global Economy

In this revised and updated edition of A Concise Guide to Macroeconomics, David A. Moss draws on his years of teaching at Harvard Business School to explain important macro concepts using clear and engaging language.

This guidebook covers the essentials of macroeconomics and examines, in a simple and intuitive way, the core ideas of output, money, and expectations. Early chapters leave you with an understanding of everything from fiscal policy and central banking to business cycles and international trade. Later chapters provide a brief monetary history of the United States as well as the basics of macroeconomic accounting. You’ll learn why countries trade, why exchange rates move, and what makes an economy grow.

Moss’s detailed examples will arm you with a clear picture of how the economy works and how key variables impact business and will equip you to anticipate and respond to major macroeconomic events, such as a sudden depreciation of the real exchange rate or a steep hike in the federal funds rate.

Read this book from start to finish for a complete overview of macroeconomics, or use it as a reference when you’re confronted with specific challenges, like the need to make sense of monetary policy or to read a balance of payments statement. Either way, you’ll come away with a broad understanding of the subject and its key pieces, and you’ll be empowered to make smarter business decisions.

Genres: Economics, Business, Nonfiction, Finance, Audiobook, Politics, Reference

199 pages, Kindle Edition

First published July 1, 2007

Reviews

[Emily · Rating 4 out of 5]

Read this for my MBA program. I appreciated that it actually was clear and concise, and the way it's laid out is much easier to understand than a traditional textbook. Wish me luck on the final this weekend! 😅

[EAL · Rating 3 out of 5]

Actually, I'm very proud of myself. Only 25% of this book went straight over my head.

Because I want to work in finance, a knowledge of macroeconomics is a necessity, and this book was, as the title would suggest, concise and clear. Perhaps if I reread it a few times I would understand better, but as it is I had to return it to the library. This book is highly recommended to anyone who is interested in finance but lacks the patience to slog through a thick book. Highly readable - if an eighth grader can comprehend most of it, so can you.

[Steven · Rating 5 out of 5]

The title for this book is very appropriate. I read it because I have a very simple understanding of economics and felt I could use more information on the subject. Macroeconomics in particular are of interest and this book clearly and succinctly explains the basic principles behind macroeconomic theory. It doesn't delve into editorializing and steers clear of employment theory, theories on economic growth and other issues. It basically just explains what each concept means, without addressing, say, the issues facing the US. For example, it explains what a trade deficit is and how it happens, yet it doesn't talk about the US trade deficit or offer opinions on how to fix said deficit. It works as a reference guide and a refresher for anyone interested in a basic understanding of how to converse on 'the Economy'.

[Soumyaroop Dutta · Rating 5 out of 5]

A great book to introduce yourself with how the economic world works. It was easy to follow and never felt dull. Short and precise.

[Hannah Liu]

I feel slightly smarter

[Priya Ravinder · Rating 5 out of 5]

It's a great book to understand how the macroeconomic that is the trades between the countries work. Explains money in countries, GDP, monetary policy, the impact of inflation on GDP, foreign exchange etc.
It could be summarized into the below:

1. Output-
National Output is GDP
- GDP= Consumption by household (C) + Investments (I) + Govt spending (G) + Exports (EX) - Imports (IM)
- That is GDP is total expenditure on final goods and services minus imports.
- All international transactions are recorded in a country's balance of payments (BOP) statement.
- A nation can increase its GDP by improving - 1. Labor(# of hours worked), 2. Capital (Increase in PPE) 3. TFP (Total factor productivity) efficiency with which labor and capital are used.

2. Money-

Increase in money supply causes:
-Interest rate falls (more the supply less the demand concept)
-Exchange rate depreciates ( more dollars in the world means less value for it)
- Price level rises (inflation)

Decrease in money supply causes:
- Interest rate hikes
-Exchange rate appreciates
-Price level falls (depreciation)

Nominal Vs Real GDP
Nominal GDP account for increase in price due to inflation. Real subtracts the inflation and counts only the increase in output.

Nominal Vs Real Interest rate and Exchange rates are the same. Nominal is with inflation and real is without.

Banks: Central/national banks issue currency. In US the central bank is called the Federal reserve or the FED.
Although central bank creates money its not the only bank to create money. Currency is not the only form of money. M1 or the money supply includes currency in circulation and demand deposits. The banks usually lend out the money which means its in your account as well as lent to someone else.- Money multiplier.. If banks lent out 90% of the money the leakage would be 10%. This is also the reserve and fed can control this to manage the money supply.

Monetary policy is a set of tools that a nation's central bank has available to promote sustainable economic growth by controlling the overall supply of money that is available to the nation's banks, its consumers, and its businesses.

Three basic tools of monetary policy: (to manage money)
1. Discount rate: interest rate that a central bank lends to commercial bank is called discount rate
2. Reserve requirement: Central bank dictates the amount of reserve that banks must hold and not lend
3. Open market operations: Fed buys govt bonds & other private financial assets to inject money and sells these assets to contract the money.

[Alejandro Alvarez · Rating 5 out of 5]

Lovely book. Super light and easy to understand. David share what are the main things to take into account when you want to know better the real macroeconomic world. So he basically teaches the principals driven forces such us, outputs, money, and speculations. He also made a brief description of the balance of payments (BOP), money multiplier effect, a few theories of Keynes, and how interest rates work. One of the things that I found amazing about David is the way he tries to keep telling that macroeconomics is a very inexact science, which is kind of obvious. That's why it is so cool (figure it out how to code the puzzle).
Read this book if you want to know more about how our world works and keep your macroeconomic knowledge in proper shape.

[Kenyon Harbison · Rating 5 out of 5]

With all that is going on in the economy today, and with worries about monetary policy, etc., I wanted to brush up on my basic macroeconomics, so I checked this book out at the library. It served my purposes perfectly. It covers the major basic macroeconomic principles (components of GDP, nominal and real interest rates, comparative advantage, etc., etc.) in clear prose that...ahem...does not sound like it was written by an economist. Very readable. Short. It skips the equations and explains everything clearly and concisely. Highly recommended if you are not an economist but want to do what I did and make your opinions a little bit more informed.

[Mindaugas Mozūras · Rating 3 out of 5]

A worthwhile read for those considering starting a trade war using tariffs.

[Catarina Almeida · Rating 5 out of 5]

This book accomplishes all the objectives proposed. It gives an excellent explanation of the fundamental concepts that involve the economy.

[Jeevan Koneti · Rating 4 out of 5]

Good book. Gives you high-level overview of Macro Economics concepts.

[Sid1983 · Rating 4 out of 5]

POST READING
The first part looks at money, output and expectations as the three major macroeconomic forces, and the interplay
The second part looks at ancillary topics like accounting for GDP and BOP statements
Pretty quick, basic read
Application: add to framework on macro

I.1 \ OUTPUT
Is key because ultimately it's output / capita that makes a country wealthy (vs. money/capita because printing)
Measure is GDP via the expenditure method (vs. value added or income) and is a fx CIGNx ==> if output (GDP) consumed is more than created (CIG) then NX has to be -ve ==> imports> exports ==> country is borrowing from abroad
Output increases with labor, capital or TFP
2 approaches:
A. Supply side / trickle down / Reaganomics wherein the belief is willingness of producers' sets economic growth
○ Focuses on increasing output i.e. the supply
○ E.g. reduce tax to increase wages increasing consumption and prompting investment which ought to drive R&D, increasing TFP in the long run
B. Keynesian theory calls for "managing demand" via government expenditure and lower taxes through monetary and fiscal policy
Recessions occur because in the short run the prices are sticky as is employment, and in the longer run, you have shocks

I.2\ MONEY
3 prices of money are interest rates, exchange rates and aggregate price of all goods and services i.e. price deflator
If money supply goes up, price for money goes down i.e. rates go down, the currency depreciates and inflation goes up
What's interesting is the interplay of these three price factors
E.g. real GDP up if output rises while nominal up if output and prices rise
Or if money supply goes up, nominal rates can fall but inflation is expected then it can push nominal rates up, ambiguous
Money illusion: when people think in nominal terms and see their incomes going up vs the effect of inflation
Money supply is changed by central bank either changing the rate at which banks to lend each other i.e. discount rate or the reserve requirement of more often, open market operations

I.3\ EXPECTATIONS
Can drive reality
E.g. if you expect inflation to go up, then you increase your prices expecting wages to go up which then becomes self fulfilling
Or if you expect bad times, you save more and reduce consumption and the GDP falls below optimal levels i.e. GDP gap
Solution 1: monetary policy
Issue is liquidity trap wherein rate are near 0 which reduces the desire to convert money into financial assets (because you aren't earning anything) and demand for cash goes up with supply so rates stay the same
Solution 2: fiscal policy i.e. increase the G in CIGNx
Increase the deficit, but if we're at full employment, caution, it'll increase inflation. If we're at low employments then output goes up AND prices go up

II.1\ US MONETARY HISTORY
Gold system ought to be self regulating in theory
Inflation goes up, prices rise, imports rise, gold leaves the country, price of gold domestically goes up and inflation falls
Issue is rates fluctuate wildly with seasonal demand for money

II.2\ GDP ACCOUNTING
Expenditure method is preferred, final expenditure on all goods and services
NDP = GDP less depreciation but the issue is no real practical way of measuring depreciation
GNP is output by residents of a country living anywhere while GDP is within the borders of the country

II.3\ READING BOP STATEMENTS
It's an account of cross border transactions
Page 116
The financial account line item under capital account is key
Omissions are plugs but it's where money leaving the country in secret show s up, it's people in the know taking assets out discreetly
Double entry system
…credits: think of them as sources of fx, or, an increase in liabilities or decrease in assets
… debits: uses of fx, or, increases in assets or decrease in liabilities

II.4\ FX
Current account surplus is when demand by foreigners of a country's goods and services
Inflation rises, LT fx depreciates
If rates rise, demand for fx goes up as foreigners want more of the fin assets

II.5\ CONNECTING, OUTPUT WITH EXPECTATIONS AND MONEY
Page 133
Money supply affects inflation, interest rates and fx rates
Macroeconomics deals with money supply
E.g. when it goes up, nominal GDP goes up but real GDP (measured in constant currency) may not as it measures output increases, not price increases due to inflation
Macroeconomics also deals with policy to set expectations which can drive reality

[Evan Milner · Rating 3 out of 5]

Does exactly what it says on the tin. The core of the book consists of three chapters focussing on the key subjects: output, money, and expectations. This is followed by chapters which further explain the basics of GDP accounting, Balance of Payments statements, and exchange rates. There is also a chapter on the history of monetary policy in the United States, but truthfully it was too brief to be of much use.

Throughout, Moss reminds us that a lot of conventional macroeconomic wisdom has been severely tested of late by the 2008 crisis (the edition I read was published in 2014) and the result is a book that, to a surprising extent given its origins in the Harvard Business School, is ideologically unblinkered. There is a basic confidence in the tenets of mainstream economic thought, but not to the point of being articles of faith.

Moss's book is not detailed enough to serve the needs of someone who is planning to study macroeconomics formally, though it might be usefully read beforehand. However, for someone like me who simply wanted to bolster my understanding of the basics to assist my reading of economic history, it was perfect.

[Goodnight · Rating 5 out of 5]

This is not one of those 'concise guides' that lure beginners in with a promising title then turns out to be an esoteric text with 300 pages of unreadable junk. This is one of the best introduction texts in economics I have seen in times -- written by a Harvard Business School professor, it covers topics like GDP output, banking, exchange rates, balance of payments in super lucid language. I finished the book in less than 3 hours - it's short and very readable. Highly suggested for anyone with an interest in macroeconomics.

[Kevin · Rating 3 out of 5]

Great overview - explained a lot of concepts that you hear about in the news - inflation, interest rates, exchange rates. Acknowledged the limits of macroeconomics as a field while providing some useful historical examples of where it might have been useful.

[Joe Murphy · Rating 4 out of 5]

Reading to supplement an economics for managers course

[Eugene Wong · Rating 5 out of 5]

Great Concise guide to macroeconomics. Updated to understand the post GFC world.

[Xinyu Wu · Rating 5 out of 5]

Macro economic 101: What will happen after printing money? (Selected topic review of this book)

We have always heard that printing money will cause inflation. Is that a universal truth? What other things could change because of it? This post tries to describe what could happen after the quantity of money in the market increases.

First of all, how does central banks influence money supply? They can do so through open market operations, which means purchasing financial securities (government bonds or other assets from private financial institutions) on the open market. It is one of the three basic monetary policy tools. (The other two are lowering its discount rate with which commercial banks use to borrow from the central bank and managing reserve requirement on bank deposits.)

Generally speaking, there are three things that could change as the quantity of money changes: interest rate, exchange rate, aggregated price level.
1. Interest rate tends to fall after money supply increase because given the same demand, it’s easier to obtain (borrow) money now. Since interest rate measures how hard to borrow money, it will fall.

2. Similarly, a country’s currency tends to depreciate after the money supply increases. When the international market abounds with dollars, given the same demand for the US dollar, dollar will depreciate relative to other currencies.

3. Lastly, as mentioned in the beginning, experience has told us money supply increase tends to push up the price level. Consumers will have more money to buys the same amount of stuff, which causes inflation.

When looking at them individually, things are clear. The interesting part is that when putting them together, things become complex because they counteract with each other.

As mentioned above, increasing money supply will decrease interest rate and cause inflation. Then, people's expectation for inflation will push long-term interest rate up. The reason is that banks now would adjust the nominal interest rate to catch up with the expected inflation rate so they can make the same money. If inflation expectation has become inflation in reality, short-term interest rate will increase as well for the same reason. Therefore, there is a downward pressure that could offset the impact from money supply and the ultimate effect is not clear.

To add to the complexity, there is also inflation targeting of the central bank. Inflation targeting is a strategy introduced three decades ago by the central banks all over the world. Central banks pick a specific target (e.g. 2 percent) and then intervene by changing interest rate to achieve this goal. The most important part of this is credibility. If everyone believes that the central banks will take whatever it cost to reach this goal, then the aforementioned inflation expectation will not happen at all, and thus interest rate won’t be impacted by it.

Now you can see how many factors are taking effect here. Indeed, there are many examples in the history that the data shows different from common knowledge (e.g money supply increases while interest rate rises as well). Then you might wonder what’s the point of the learning. The point is that it gives us a baseline model to frame the world and from there you will explore these extra variables that lead to the diversion and come up with new explanations for them.

[Logan Shade · Rating 4 out of 5]

A Concise Review of A Concise Guide to Macroeconomics by someone who is very much not a macroeconomist:

David Moss based this book off his macroeconomics class at Harvard University. Difficult topic, prestigious university. However, from first page to last of the appendixes (<200 pages) he sticks to the concise promise of the title.

Having no training in economics shouldn't deter you from reading and rereading this book. Moss opens and closes the book saying macroeconomics isn't an exact science, which leads to more questions than answers. But if the approach to the book is with curiosity then the pay off will be worth it. If you are remotely interested in economics but think you'll be lost if you try and research the topic yourself, you've found the right book.

I read this book in print and did not take notes. I found this approach to be useful in staying focused on the flow of the topics as they were introduced, and their interactions as it moved along, rather than getting myself stuck in any particular chapter. On a reread I would take it slower and with a notepad or notes app. I did not flip to the back each time a superscript note popped up, but I do recommend keeping a 2nd bookmark in the back to move along with the notes. Some of them are just references, others are paragraphs with important context.

[DurchNachtUndWind · Rating 5 out of 5]

A book that delivers on its promise. Prof Moss provides a concise and lucid introduction to core macroeconomic concepts by describing what he considers to be three basic pillars of the discipline: output, money, and expectations. The dynamics of each of these pillars and how policy makers measure and (attempt to) control them are outlined in three chapters. What follows are chapters dedicated to special topics that may, or may not, be relevant to the reader based on their purpose. Some of them (e.g. Reading a Balance of Payments Statement) seemed rather technical and specific while others (e.g. A Short History of Money and Monetary Policy in the United States) will appeal to a broader audience.

Overall I walked away from this book with a clearer understanding of these ideas and I recommend it to anyone who takes an interest in them:
- the importance of output to macroeconomic theory
- an understanding of money as a claim on that output
- the importance of real vs nominal interest and exchange rates
- how net imports build indebtedness between countries
- how expectations can lead to self-fulfilling prophecies (e.g. expectations about inflation)
- how expectations can lead to mispricing and consequent instability (dotcom bubble, subprime mortgage crisis)

[Stephanie · Rating 4 out of 5]

Indeed a concise guide to macroeconomics, covering fundamental concepts such as GDP, balance of payments (BOP), sources of economic growth, interest rates, exchange rates, inflation, how expectations can literally drive reality, and how monetary and fiscal policy are used to manage those factors mentioned above.

As with other (very few) macroeconomic materials I’ve read, I came away feeling like I learned something but still far from grasping the complexities of the macroeconomic environment. As acknowledged in the book, theory often diverges from practice, and currency markets remain unpredictable. That said, it’s a well-written and accessible book that provides a useful toolkit to start making sense of what’s happening in the economy.

[Kimberly Roche · Rating 3 out of 5]

This feels like a solid primer, clearly aimed at beginning students of macroeconomics. (The book devotes a whole chapter to the parsing of certain kinds of technical reports that are definitely not relevant to the lay reader.) The organization is broadly into the topics "output", "money", and "expectations" and in this form, it covers the basics pretty clearly. It aims to be readable in a couple of sittings and for a casual reader willing to skim the second - more applied, technical - section of the book, that's fair. Dry but quick and readable.

[Amin Mo · Rating 5 out of 5]

The title says it all; a brief short concise introduction to macroeconomics. This book is only viable for people with no knowledge about macroeconomics and who want to get more insight about the subject. I believe it’s wholly basic, so even people with basic knowledge are advised to pick a different more advanced book about the subject.
I myself knew almost nothing of macroeconomics, and so this book was convenient for people like me...

[Danny Lee · Rating 4 out of 5]

A very introductory book to the 3 pillars constituting Macroeconomics. "Expectation" is what I did not expect. Something like Sorros's "Reflexivity". Yet does it defy the reasonable man and rational market hypothesis? The author is good in introducing matters but one can only regard it as introduction or even something short of. Would be better if the author could give some reference for further in-depth study.

[Raj Agrawal · Rating 4 out of 5]

A measured, accessible introduction to macroeconomics that doesn’t take itself too seriously. I’m just starting the cognitive connection between economics and national security strategy, so this book was a lot of help getting me started. It’s still a bit too fast-paced in some aspects, but I think Moss did a great job breaking this complex topic down into something beginners can digest.

[Priyanshu Jain · Rating 5 out of 5]

The book has been a teacher to me. Reading each and every page was like being in a lecture, but the lecturer was not boring this time.

Macroeconomics which might seem confusing has been made simple in this book. Anyone starting in their MBA careers or aspiring to learn about how the world generally works should read it.

[Caroline · Rating 5 out of 5]

Fantastic book. The guide is accessible and teaches readers how economies work and how someone might do her own analysis of a country’s health based on e.g., the balance of payments. It’s a great introduction to macroeconomics as readers learn the overall concepts and can then go and dig a level deeper themselves. I recommend it to anyone in finance looking to understand macro or starting to dip their toes into researching sovereign debt.

[Celeste · Rating 3 out of 5]

Required reading for a module. A very concise primer on macroeconomics, introducing the components of GDP, the difference between fiscal and monetary policy — for the latter, its impact on interest rates, exchange rates and price levels. I think I would have understood this less if not for studying economics at a pre-U level, so there's no counter-factual to its effectiveness.

[Taher Bellah · Rating 4 out of 5]

A very brief and simple introduction to an extremely complicated topic. I will think twice before volunteering my economic analysis as it will most likely be wrong. Sad that such an important topic like macroeconomics is barely touched upon at schools. One thing I will never forget from this book is the concept of self fulfilling prophecy.

[Meiran · Rating 5 out of 5]

True to its name, this is a concise guide to macroeconomics (it's only a little over 100 pages). It's very accessible and exactly the macroeconomics primer I was looking for to help me better understand global affairs. It's certainly a dry topic, but I think for anyone motivated to learn the subject, it's an excellent entry point.