\documentclass[11pt]{article}
\usepackage{mathnotes}
\discipline{UCLA-ALIGNED COURSE FIELD NOTES}
\course{ECON 102}{Macroeconomic Theory}{Growth, fluctuations, labor, money, expectations, and monetary and fiscal policy}

\begin{document}
\makemathcover
\coursefrontmatter{
\begin{curriculumtable}
\unitline{1}{National accounts and macroeconomic equilibrium}{Reconstruct the model, work an application, test its assumptions, and explain the result in ordinary language.}
\unitline{2}{Solow growth and convergence}{Reconstruct the model, work an application, test its assumptions, and explain the result in ordinary language.}
\unitline{3}{Consumption, saving, and investment}{Reconstruct the model, work an application, test its assumptions, and explain the result in ordinary language.}
\unitline{4}{Money, inflation, and asset pricing}{Reconstruct the model, work an application, test its assumptions, and explain the result in ordinary language.}
\unitline{5}{Short-run demand and interest-rate models}{Reconstruct the model, work an application, test its assumptions, and explain the result in ordinary language.}
\unitline{6}{Aggregate supply, unemployment, and expectations}{Reconstruct the model, work an application, test its assumptions, and explain the result in ordinary language.}
\unitline{7}{Monetary and fiscal stabilization}{Reconstruct the model, work an application, test its assumptions, and explain the result in ordinary language.}
\unitline{8}{Open-economy macro and business cycles}{Reconstruct the model, work an application, test its assumptions, and explain the result in ordinary language.}
\unitline{9}{Integration studio}{Combine several chapters in one case, preserve their assumptions, and reconcile the result across representations.}
\unitline{10}{Cumulative review}{Retrieve the full course map from memory and solve mixed problems without chapter labels.}
\end{curriculumtable}
}{\curriculumsource{https://catalog.registrar.ucla.edu/course/2025/econ102}}

\section{National accounts and macroeconomic equilibrium}

\begin{idea}
National income identities connect production, expenditure, income, saving, investment, government balances, and net exports. An identity always holds by definition; a behavioral equilibrium explains how variables adjust to make plans consistent.
\end{idea}
% MASTERCLASS EXPANSION
\subsection{Rebuild the chapter from first principles}
The claim I need to own is this: National income identities connect production, expenditure, income, saving, investment, government balances, and net exports. An identity always holds by definition; a behavioral equilibrium explains how variables adjust to make plans consistent. I do not count that as learned just because the sentence looks familiar. I should be able to name the objects, state what changes and what stays fixed, recover the rule from the definitions, and explain why the result is allowed.

\begin{move}
\textbf{My working sequence}
\begin{enumerate}
  \item \textbf{Translate.} Rewrite the prompt in the language of national accounts and macroeconomic equilibrium. List the known quantities, the unknown, the units or types, and any hidden constraint.
  \item \textbf{Choose.} State the theorem, model, algorithm, accounting rule, or physical law before substituting values. This is where I make the assumption visible.
  \item \textbf{Execute.} Work one justified step at a time and keep intermediate state readable enough that I can audit it later.
  \item \textbf{Verify.} Check a boundary case, sign, unit, invariant, order of magnitude, or alternative derivation. Then translate the result back into an ordinary sentence.
\end{enumerate}
\end{move}

\subsection{Details I would refuse to skip}
\begin{itemize}
  \item \textbf{Definitions:} I should be able to define every technical noun in the chapter without using that same noun in the definition.
  \item \textbf{Assumptions:} I write the condition that makes the method legal beside the method itself. A correct procedure under the wrong assumptions is still a wrong answer.
  \item \textbf{Representation:} I move freely among words, equations or code, a diagram, and a small numerical example. If one representation disagrees with another, that disagreement is useful evidence.
  \item \textbf{Failure modes:} I keep the nearest counterexample in mind: the boundary where the rule changes, the invariant breaks, or the model stops matching reality.
  \item \textbf{Communication:} My final answer names what the result means and what it does not establish. I do not let notation do the explanatory work for me.
\end{itemize}

\begin{sanitybox}
\textbf{Closed-note check.} Can I teach national accounts and macroeconomic equilibrium on a blank page, derive or reconstruct its main rule, work a fresh example, and diagnose a deliberately broken solution? If I can only recognize the finished work, I am not done.
\end{sanitybox}

\subsection{How this chapter connects}
I read this chapter as the bridge from the course foundations to solow growth and convergence. The earlier material supplies the language and constraints; this chapter adds a new reasoning move; the later material asks me to use that move without being told its name. That connection matters because exams and real projects mix chapters on purpose.


\subsection{The full working model}
\begin{itemize}
  \item \textbf{Core claim.} National income identities connect production, expenditure, income, saving, investment, government balances, and net exports.
  \item \textbf{What moves.} An identity always holds by definition; a behavioral equilibrium explains how variables adjust to make plans consistent.
  \item \textbf{What keeps the answer honest.} The model becomes useful only when I can apply national accounts and macroeconomic equilibrium to an unfamiliar case and defend the assumptions.
  \item \textbf{Mastery standard.} I can define the objects, rebuild the rule, work a fresh case, compare alternatives, and diagnose a broken solution without relying on recognition.
\end{itemize}

\begin{studenttake}
I mark identities and behavioral equations differently so I do not claim an identity causes anything.
\end{studenttake}

\begin{plainbox}
National income identities connect production, expenditure, income, saving, investment, government balances, and net exports.
\end{plainbox}

\begin{examplebox}
\textbf{Question.} In a closed economy with government, relate national saving to private and public saving.

\textbf{Walkthrough.} National saving equals private saving plus public saving: income minus consumption and taxes, plus taxes minus government spending. In equilibrium it finances investment.
\end{examplebox}

\begin{warningbox}
The fastest way to get this chapter wrong is to use the visible procedure without naming its assumption, units, time period, reference group, or boundary. I put that condition beside the work and verify the result independently.
\end{warningbox}

\begin{chapterpractice}
\textbf{Practice 1.} In a closed economy with government, relate national saving to private and public saving.

\textbf{Solution.} National saving equals private saving plus public saving: income minus consumption and taxes, plus taxes minus government spending. In equilibrium it finances investment.

\medskip
\textbf{Practice 2.} Explain national accounts and macroeconomic equilibrium to a classmate using one definition, one concrete example, one assumption, and one failure mode.

\textbf{Solution.} Begin with the core claim above, use the worked case as the concrete example, state the condition highlighted by the warning, and choose a failure where that condition does not hold. A complete explanation connects all four pieces instead of listing them.

\medskip
\textbf{Mastery practice A.} Reconstruct national accounts and macroeconomic equilibrium from a blank page. Include the central definition, the governing rule, one required assumption, and one boundary case.

\textbf{Solution.} Start from the blue idea box, but rewrite it in my own words. Identify the objects and state, name the rule before using it, copy the relevant assumption from the details audit, and choose a boundary where that assumption becomes equality or fails. A complete solution explains why each part belongs; a list of vocabulary is not enough.

\medskip
\textbf{Mastery practice B.} A classmate gets a polished-looking answer to a national accounts and macroeconomic equilibrium problem but never states a model or checks the result. Write the shortest useful review of that solution.

\textbf{Solution.} I would ask four concrete questions: What exactly are the inputs and desired output? Which rule licenses the main step? Which assumption could invalidate it? Which independent check supports the conclusion? If the answer cannot survive those four questions, I treat the numerical or verbal result as unverified.

\end{chapterpractice}

\section{Solow growth and convergence}

\begin{idea}
The Solow model balances saving-driven capital accumulation against depreciation and population or technology growth. Diminishing returns produce a steady state; technology drives sustained per-capita growth in the basic model.
\end{idea}
% MASTERCLASS EXPANSION
\subsection{Rebuild the chapter from first principles}
The claim I need to own is this: The Solow model balances saving-driven capital accumulation against depreciation and population or technology growth. Diminishing returns produce a steady state; technology drives sustained per-capita growth in the basic model. I do not count that as learned just because the sentence looks familiar. I should be able to name the objects, state what changes and what stays fixed, recover the rule from the definitions, and explain why the result is allowed.

\begin{move}
\textbf{My working sequence}
\begin{enumerate}
  \item \textbf{Translate.} Rewrite the prompt in the language of solow growth and convergence. List the known quantities, the unknown, the units or types, and any hidden constraint.
  \item \textbf{Choose.} State the theorem, model, algorithm, accounting rule, or physical law before substituting values. This is where I make the assumption visible.
  \item \textbf{Execute.} Work one justified step at a time and keep intermediate state readable enough that I can audit it later.
  \item \textbf{Verify.} Check a boundary case, sign, unit, invariant, order of magnitude, or alternative derivation. Then translate the result back into an ordinary sentence.
\end{enumerate}
\end{move}

\subsection{Details I would refuse to skip}
\begin{itemize}
  \item \textbf{Definitions:} I should be able to define every technical noun in the chapter without using that same noun in the definition.
  \item \textbf{Assumptions:} I write the condition that makes the method legal beside the method itself. A correct procedure under the wrong assumptions is still a wrong answer.
  \item \textbf{Representation:} I move freely among words, equations or code, a diagram, and a small numerical example. If one representation disagrees with another, that disagreement is useful evidence.
  \item \textbf{Failure modes:} I keep the nearest counterexample in mind: the boundary where the rule changes, the invariant breaks, or the model stops matching reality.
  \item \textbf{Communication:} My final answer names what the result means and what it does not establish. I do not let notation do the explanatory work for me.
\end{itemize}

\begin{sanitybox}
\textbf{Closed-note check.} Can I teach solow growth and convergence on a blank page, derive or reconstruct its main rule, work a fresh example, and diagnose a deliberately broken solution? If I can only recognize the finished work, I am not done.
\end{sanitybox}

\subsection{How this chapter connects}
I read this chapter as the bridge from national accounts and macroeconomic equilibrium to consumption, saving, and investment. The earlier material supplies the language and constraints; this chapter adds a new reasoning move; the later material asks me to use that move without being told its name. That connection matters because exams and real projects mix chapters on purpose.


\subsection{The full working model}
\begin{itemize}
  \item \textbf{Core claim.} The Solow model balances saving-driven capital accumulation against depreciation and population or technology growth.
  \item \textbf{What moves.} Diminishing returns produce a steady state; technology drives sustained per-capita growth in the basic model.
  \item \textbf{What keeps the answer honest.} The model becomes useful only when I can apply solow growth and convergence to an unfamiliar case and defend the assumptions.
  \item \textbf{Mastery standard.} I can define the objects, rebuild the rule, work a fresh case, compare alternatives, and diagnose a broken solution without relying on recognition.
\end{itemize}

\begin{studenttake}
My shorthand for this chapter is: my shorthand for this chapter is: a higher saving rate changes the level and transition path, not the long-run technological growth rate.
\end{studenttake}

\begin{plainbox}
The Solow model balances saving-driven capital accumulation against depreciation and population or technology growth.
\end{plainbox}

\begin{examplebox}
\textbf{Question.} What happens when saving rises below steady state?

\textbf{Walkthrough.} Investment per effective worker rises above break-even investment, capital deepens, and output grows during transition until a higher steady-state level is reached.
\end{examplebox}

\begin{warningbox}
The fastest way to get this chapter wrong is to use the visible procedure without naming its assumption, units, time period, reference group, or boundary. I put that condition beside the work and verify the result independently.
\end{warningbox}

\begin{chapterpractice}
\textbf{Practice 1.} What happens when saving rises below steady state?

\textbf{Solution.} Investment per effective worker rises above break-even investment, capital deepens, and output grows during transition until a higher steady-state level is reached.

\medskip
\textbf{Practice 2.} Explain solow growth and convergence to a classmate using one definition, one concrete example, one assumption, and one failure mode.

\textbf{Solution.} Begin with the core claim above, use the worked case as the concrete example, state the condition highlighted by the warning, and choose a failure where that condition does not hold. A complete explanation connects all four pieces instead of listing them.

\medskip
\textbf{Mastery practice A.} Reconstruct solow growth and convergence from a blank page. Include the central definition, the governing rule, one required assumption, and one boundary case.

\textbf{Solution.} Start from the blue idea box, but rewrite it in my own words. Identify the objects and state, name the rule before using it, copy the relevant assumption from the details audit, and choose a boundary where that assumption becomes equality or fails. A complete solution explains why each part belongs; a list of vocabulary is not enough.

\medskip
\textbf{Mastery practice B.} A classmate gets a polished-looking answer to a solow growth and convergence problem but never states a model or checks the result. Write the shortest useful review of that solution.

\textbf{Solution.} I would ask four concrete questions: What exactly are the inputs and desired output? Which rule licenses the main step? Which assumption could invalidate it? Which independent check supports the conclusion? If the answer cannot survive those four questions, I treat the numerical or verbal result as unverified.

\end{chapterpractice}

\section{Consumption, saving, and investment}

\begin{idea}
Intertemporal households smooth marginal utility subject to lifetime resources and borrowing limits. Firms invest when expected discounted returns exceed user cost; expectations, adjustment costs, and uncertainty make spending forward-looking.
\end{idea}
% MASTERCLASS EXPANSION
\subsection{Rebuild the chapter from first principles}
The claim I need to own is this: Intertemporal households smooth marginal utility subject to lifetime resources and borrowing limits. Firms invest when expected discounted returns exceed user cost; expectations, adjustment costs, and uncertainty make spending forward-looking. I do not count that as learned just because the sentence looks familiar. I should be able to name the objects, state what changes and what stays fixed, recover the rule from the definitions, and explain why the result is allowed.

\begin{move}
\textbf{My working sequence}
\begin{enumerate}
  \item \textbf{Translate.} Rewrite the prompt in the language of consumption, saving, and investment. List the known quantities, the unknown, the units or types, and any hidden constraint.
  \item \textbf{Choose.} State the theorem, model, algorithm, accounting rule, or physical law before substituting values. This is where I make the assumption visible.
  \item \textbf{Execute.} Work one justified step at a time and keep intermediate state readable enough that I can audit it later.
  \item \textbf{Verify.} Check a boundary case, sign, unit, invariant, order of magnitude, or alternative derivation. Then translate the result back into an ordinary sentence.
\end{enumerate}
\end{move}

\subsection{Details I would refuse to skip}
\begin{itemize}
  \item \textbf{Definitions:} I should be able to define every technical noun in the chapter without using that same noun in the definition.
  \item \textbf{Assumptions:} I write the condition that makes the method legal beside the method itself. A correct procedure under the wrong assumptions is still a wrong answer.
  \item \textbf{Representation:} I move freely among words, equations or code, a diagram, and a small numerical example. If one representation disagrees with another, that disagreement is useful evidence.
  \item \textbf{Failure modes:} I keep the nearest counterexample in mind: the boundary where the rule changes, the invariant breaks, or the model stops matching reality.
  \item \textbf{Communication:} My final answer names what the result means and what it does not establish. I do not let notation do the explanatory work for me.
\end{itemize}

\begin{sanitybox}
\textbf{Closed-note check.} Can I teach consumption, saving, and investment on a blank page, derive or reconstruct its main rule, work a fresh example, and diagnose a deliberately broken solution? If I can only recognize the finished work, I am not done.
\end{sanitybox}

\subsection{How this chapter connects}
I read this chapter as the bridge from solow growth and convergence to money, inflation, and asset pricing. The earlier material supplies the language and constraints; this chapter adds a new reasoning move; the later material asks me to use that move without being told its name. That connection matters because exams and real projects mix chapters on purpose.


\subsection{The full working model}
\begin{itemize}
  \item \textbf{Core claim.} Intertemporal households smooth marginal utility subject to lifetime resources and borrowing limits.
  \item \textbf{What moves.} Firms invest when expected discounted returns exceed user cost; expectations, adjustment costs, and uncertainty make spending forward-looking.
  \item \textbf{What keeps the answer honest.} The model becomes useful only when I can apply consumption, saving, and investment to an unfamiliar case and defend the assumptions.
  \item \textbf{Mastery standard.} I can define the objects, rebuild the rule, work a fresh case, compare alternatives, and diagnose a broken solution without relying on recognition.
\end{itemize}

\begin{studenttake}
Current income and permanent resources are different, so I ask whether a shock is temporary or persistent.
\end{studenttake}

\begin{plainbox}
Intertemporal households smooth marginal utility subject to lifetime resources and borrowing limits.
\end{plainbox}

\begin{examplebox}
\textbf{Question.} How should a consumption smoother react to a one-time temporary income bonus?

\textbf{Walkthrough.} It spreads the gain over time, increasing current consumption by only part of the bonus and saving the rest, unless borrowing constraints or short horizons dominate.
\end{examplebox}

\begin{warningbox}
The fastest way to get this chapter wrong is to use the visible procedure without naming its assumption, units, time period, reference group, or boundary. I put that condition beside the work and verify the result independently.
\end{warningbox}

\begin{chapterpractice}
\textbf{Practice 1.} How should a consumption smoother react to a one-time temporary income bonus?

\textbf{Solution.} It spreads the gain over time, increasing current consumption by only part of the bonus and saving the rest, unless borrowing constraints or short horizons dominate.

\medskip
\textbf{Practice 2.} Explain consumption, saving, and investment to a classmate using one definition, one concrete example, one assumption, and one failure mode.

\textbf{Solution.} Begin with the core claim above, use the worked case as the concrete example, state the condition highlighted by the warning, and choose a failure where that condition does not hold. A complete explanation connects all four pieces instead of listing them.

\medskip
\textbf{Mastery practice A.} Reconstruct consumption, saving, and investment from a blank page. Include the central definition, the governing rule, one required assumption, and one boundary case.

\textbf{Solution.} Start from the blue idea box, but rewrite it in my own words. Identify the objects and state, name the rule before using it, copy the relevant assumption from the details audit, and choose a boundary where that assumption becomes equality or fails. A complete solution explains why each part belongs; a list of vocabulary is not enough.

\medskip
\textbf{Mastery practice B.} A classmate gets a polished-looking answer to a consumption, saving, and investment problem but never states a model or checks the result. Write the shortest useful review of that solution.

\textbf{Solution.} I would ask four concrete questions: What exactly are the inputs and desired output? Which rule licenses the main step? Which assumption could invalidate it? Which independent check supports the conclusion? If the answer cannot survive those four questions, I treat the numerical or verbal result as unverified.

\end{chapterpractice}

\section{Money, inflation, and asset pricing}

\begin{idea}
Money demand reflects transactions, opportunity cost, risk, and payment technology. Long-run inflation relates money growth to real growth under stable velocity, while Fisher effects and asset prices incorporate expectations.
\end{idea}
% MASTERCLASS EXPANSION
\subsection{Rebuild the chapter from first principles}
The claim I need to own is this: Money demand reflects transactions, opportunity cost, risk, and payment technology. Long-run inflation relates money growth to real growth under stable velocity, while Fisher effects and asset prices incorporate expectations. I do not count that as learned just because the sentence looks familiar. I should be able to name the objects, state what changes and what stays fixed, recover the rule from the definitions, and explain why the result is allowed.

\begin{move}
\textbf{My working sequence}
\begin{enumerate}
  \item \textbf{Translate.} Rewrite the prompt in the language of money, inflation, and asset pricing. List the known quantities, the unknown, the units or types, and any hidden constraint.
  \item \textbf{Choose.} State the theorem, model, algorithm, accounting rule, or physical law before substituting values. This is where I make the assumption visible.
  \item \textbf{Execute.} Work one justified step at a time and keep intermediate state readable enough that I can audit it later.
  \item \textbf{Verify.} Check a boundary case, sign, unit, invariant, order of magnitude, or alternative derivation. Then translate the result back into an ordinary sentence.
\end{enumerate}
\end{move}

\subsection{Details I would refuse to skip}
\begin{itemize}
  \item \textbf{Definitions:} I should be able to define every technical noun in the chapter without using that same noun in the definition.
  \item \textbf{Assumptions:} I write the condition that makes the method legal beside the method itself. A correct procedure under the wrong assumptions is still a wrong answer.
  \item \textbf{Representation:} I move freely among words, equations or code, a diagram, and a small numerical example. If one representation disagrees with another, that disagreement is useful evidence.
  \item \textbf{Failure modes:} I keep the nearest counterexample in mind: the boundary where the rule changes, the invariant breaks, or the model stops matching reality.
  \item \textbf{Communication:} My final answer names what the result means and what it does not establish. I do not let notation do the explanatory work for me.
\end{itemize}

\begin{sanitybox}
\textbf{Closed-note check.} Can I teach money, inflation, and asset pricing on a blank page, derive or reconstruct its main rule, work a fresh example, and diagnose a deliberately broken solution? If I can only recognize the finished work, I am not done.
\end{sanitybox}

\subsection{How this chapter connects}
I read this chapter as the bridge from consumption, saving, and investment to short-run demand and interest-rate models. The earlier material supplies the language and constraints; this chapter adds a new reasoning move; the later material asks me to use that move without being told its name. That connection matters because exams and real projects mix chapters on purpose.


\subsection{The full working model}
\begin{itemize}
  \item \textbf{Core claim.} Money demand reflects transactions, opportunity cost, risk, and payment technology.
  \item \textbf{What moves.} Long-run inflation relates money growth to real growth under stable velocity, while Fisher effects and asset prices incorporate expectations.
  \item \textbf{What keeps the answer honest.} The model becomes useful only when I can apply money, inflation, and asset pricing to an unfamiliar case and defend the assumptions.
  \item \textbf{Mastery standard.} I can define the objects, rebuild the rule, work a fresh case, compare alternatives, and diagnose a broken solution without relying on recognition.
\end{itemize}

\begin{studenttake}
I distinguish a one-time price-level change from continuing inflation.
\end{studenttake}

\begin{plainbox}
Money demand reflects transactions, opportunity cost, risk, and payment technology.
\end{plainbox}

\begin{examplebox}
\textbf{Question.} Money grows 7 percent, real output 2 percent, and velocity is stable. Approximate inflation.

\textbf{Walkthrough.} Quantity-theory arithmetic gives about 5 percent inflation in the long run, subject to the assumptions about velocity and real output.
\end{examplebox}

\begin{warningbox}
The fastest way to get this chapter wrong is to use the visible procedure without naming its assumption, units, time period, reference group, or boundary. I put that condition beside the work and verify the result independently.
\end{warningbox}

\begin{chapterpractice}
\textbf{Practice 1.} Money grows 7 percent, real output 2 percent, and velocity is stable. Approximate inflation.

\textbf{Solution.} Quantity-theory arithmetic gives about 5 percent inflation in the long run, subject to the assumptions about velocity and real output.

\medskip
\textbf{Practice 2.} Explain money, inflation, and asset pricing to a classmate using one definition, one concrete example, one assumption, and one failure mode.

\textbf{Solution.} Begin with the core claim above, use the worked case as the concrete example, state the condition highlighted by the warning, and choose a failure where that condition does not hold. A complete explanation connects all four pieces instead of listing them.

\medskip
\textbf{Mastery practice A.} Reconstruct money, inflation, and asset pricing from a blank page. Include the central definition, the governing rule, one required assumption, and one boundary case.

\textbf{Solution.} Start from the blue idea box, but rewrite it in my own words. Identify the objects and state, name the rule before using it, copy the relevant assumption from the details audit, and choose a boundary where that assumption becomes equality or fails. A complete solution explains why each part belongs; a list of vocabulary is not enough.

\medskip
\textbf{Mastery practice B.} A classmate gets a polished-looking answer to a money, inflation, and asset pricing problem but never states a model or checks the result. Write the shortest useful review of that solution.

\textbf{Solution.} I would ask four concrete questions: What exactly are the inputs and desired output? Which rule licenses the main step? Which assumption could invalidate it? Which independent check supports the conclusion? If the answer cannot survive those four questions, I treat the numerical or verbal result as unverified.

\end{chapterpractice}

\section{Short-run demand and interest-rate models}

\begin{idea}
Goods-market spending and monetary-policy or money-market conditions jointly determine output and interest rates in short-run models. Multipliers, crowding out, expectations, and the zero lower bound change policy transmission.
\end{idea}
% MASTERCLASS EXPANSION
\subsection{Rebuild the chapter from first principles}
The claim I need to own is this: Goods-market spending and monetary-policy or money-market conditions jointly determine output and interest rates in short-run models. Multipliers, crowding out, expectations, and the zero lower bound change policy transmission. I do not count that as learned just because the sentence looks familiar. I should be able to name the objects, state what changes and what stays fixed, recover the rule from the definitions, and explain why the result is allowed.

\begin{move}
\textbf{My working sequence}
\begin{enumerate}
  \item \textbf{Translate.} Rewrite the prompt in the language of short-run demand and interest-rate models. List the known quantities, the unknown, the units or types, and any hidden constraint.
  \item \textbf{Choose.} State the theorem, model, algorithm, accounting rule, or physical law before substituting values. This is where I make the assumption visible.
  \item \textbf{Execute.} Work one justified step at a time and keep intermediate state readable enough that I can audit it later.
  \item \textbf{Verify.} Check a boundary case, sign, unit, invariant, order of magnitude, or alternative derivation. Then translate the result back into an ordinary sentence.
\end{enumerate}
\end{move}

\subsection{Details I would refuse to skip}
\begin{itemize}
  \item \textbf{Definitions:} I should be able to define every technical noun in the chapter without using that same noun in the definition.
  \item \textbf{Assumptions:} I write the condition that makes the method legal beside the method itself. A correct procedure under the wrong assumptions is still a wrong answer.
  \item \textbf{Representation:} I move freely among words, equations or code, a diagram, and a small numerical example. If one representation disagrees with another, that disagreement is useful evidence.
  \item \textbf{Failure modes:} I keep the nearest counterexample in mind: the boundary where the rule changes, the invariant breaks, or the model stops matching reality.
  \item \textbf{Communication:} My final answer names what the result means and what it does not establish. I do not let notation do the explanatory work for me.
\end{itemize}

\begin{sanitybox}
\textbf{Closed-note check.} Can I teach short-run demand and interest-rate models on a blank page, derive or reconstruct its main rule, work a fresh example, and diagnose a deliberately broken solution? If I can only recognize the finished work, I am not done.
\end{sanitybox}

\subsection{How this chapter connects}
I read this chapter as the bridge from money, inflation, and asset pricing to aggregate supply, unemployment, and expectations. The earlier material supplies the language and constraints; this chapter adds a new reasoning move; the later material asks me to use that move without being told its name. That connection matters because exams and real projects mix chapters on purpose.


\subsection{The full working model}
\begin{itemize}
  \item \textbf{Core claim.} Goods-market spending and monetary-policy or money-market conditions jointly determine output and interest rates in short-run models.
  \item \textbf{What moves.} Multipliers, crowding out, expectations, and the zero lower bound change policy transmission.
  \item \textbf{What keeps the answer honest.} The model becomes useful only when I can apply short-run demand and interest-rate models to an unfamiliar case and defend the assumptions.
  \item \textbf{Mastery standard.} I can define the objects, rebuild the rule, work a fresh case, compare alternatives, and diagnose a broken solution without relying on recognition.
\end{itemize}

\begin{studenttake}
I use IS-LM or its modern policy-rule cousin as a map of interactions, not a literal mechanical economy.
\end{studenttake}

\begin{plainbox}
Goods-market spending and monetary-policy or money-market conditions jointly determine output and interest rates in short-run models.
\end{plainbox}

\begin{examplebox}
\textbf{Question.} What is the standard IS effect of higher government purchases?

\textbf{Walkthrough.} The IS schedule shifts right. Output and the interest rate tend to rise; the rate increase crowds out some private spending unless monetary policy accommodates.
\end{examplebox}

\begin{warningbox}
The fastest way to get this chapter wrong is to use the visible procedure without naming its assumption, units, time period, reference group, or boundary. I put that condition beside the work and verify the result independently.
\end{warningbox}

\begin{chapterpractice}
\textbf{Practice 1.} What is the standard IS effect of higher government purchases?

\textbf{Solution.} The IS schedule shifts right. Output and the interest rate tend to rise; the rate increase crowds out some private spending unless monetary policy accommodates.

\medskip
\textbf{Practice 2.} Explain short-run demand and interest-rate models to a classmate using one definition, one concrete example, one assumption, and one failure mode.

\textbf{Solution.} Begin with the core claim above, use the worked case as the concrete example, state the condition highlighted by the warning, and choose a failure where that condition does not hold. A complete explanation connects all four pieces instead of listing them.

\medskip
\textbf{Mastery practice A.} Reconstruct short-run demand and interest-rate models from a blank page. Include the central definition, the governing rule, one required assumption, and one boundary case.

\textbf{Solution.} Start from the blue idea box, but rewrite it in my own words. Identify the objects and state, name the rule before using it, copy the relevant assumption from the details audit, and choose a boundary where that assumption becomes equality or fails. A complete solution explains why each part belongs; a list of vocabulary is not enough.

\medskip
\textbf{Mastery practice B.} A classmate gets a polished-looking answer to a short-run demand and interest-rate models problem but never states a model or checks the result. Write the shortest useful review of that solution.

\textbf{Solution.} I would ask four concrete questions: What exactly are the inputs and desired output? Which rule licenses the main step? Which assumption could invalidate it? Which independent check supports the conclusion? If the answer cannot survive those four questions, I treat the numerical or verbal result as unverified.

\end{chapterpractice}

\section{Aggregate supply, unemployment, and expectations}

\begin{idea}
Price and wage stickiness create short-run output gaps. Phillips curves link inflation to slack and expectations; natural-rate and hysteresis ideas explain why labor-market history and institutions matter.
\end{idea}
% MASTERCLASS EXPANSION
\subsection{Rebuild the chapter from first principles}
The claim I need to own is this: Price and wage stickiness create short-run output gaps. Phillips curves link inflation to slack and expectations; natural-rate and hysteresis ideas explain why labor-market history and institutions matter. I do not count that as learned just because the sentence looks familiar. I should be able to name the objects, state what changes and what stays fixed, recover the rule from the definitions, and explain why the result is allowed.

\begin{move}
\textbf{My working sequence}
\begin{enumerate}
  \item \textbf{Translate.} Rewrite the prompt in the language of aggregate supply, unemployment, and expectations. List the known quantities, the unknown, the units or types, and any hidden constraint.
  \item \textbf{Choose.} State the theorem, model, algorithm, accounting rule, or physical law before substituting values. This is where I make the assumption visible.
  \item \textbf{Execute.} Work one justified step at a time and keep intermediate state readable enough that I can audit it later.
  \item \textbf{Verify.} Check a boundary case, sign, unit, invariant, order of magnitude, or alternative derivation. Then translate the result back into an ordinary sentence.
\end{enumerate}
\end{move}

\subsection{Details I would refuse to skip}
\begin{itemize}
  \item \textbf{Definitions:} I should be able to define every technical noun in the chapter without using that same noun in the definition.
  \item \textbf{Assumptions:} I write the condition that makes the method legal beside the method itself. A correct procedure under the wrong assumptions is still a wrong answer.
  \item \textbf{Representation:} I move freely among words, equations or code, a diagram, and a small numerical example. If one representation disagrees with another, that disagreement is useful evidence.
  \item \textbf{Failure modes:} I keep the nearest counterexample in mind: the boundary where the rule changes, the invariant breaks, or the model stops matching reality.
  \item \textbf{Communication:} My final answer names what the result means and what it does not establish. I do not let notation do the explanatory work for me.
\end{itemize}

\begin{sanitybox}
\textbf{Closed-note check.} Can I teach aggregate supply, unemployment, and expectations on a blank page, derive or reconstruct its main rule, work a fresh example, and diagnose a deliberately broken solution? If I can only recognize the finished work, I am not done.
\end{sanitybox}

\subsection{How this chapter connects}
I read this chapter as the bridge from short-run demand and interest-rate models to monetary and fiscal stabilization. The earlier material supplies the language and constraints; this chapter adds a new reasoning move; the later material asks me to use that move without being told its name. That connection matters because exams and real projects mix chapters on purpose.


\subsection{The full working model}
\begin{itemize}
  \item \textbf{Core claim.} Price and wage stickiness create short-run output gaps.
  \item \textbf{What moves.} Phillips curves link inflation to slack and expectations; natural-rate and hysteresis ideas explain why labor-market history and institutions matter.
  \item \textbf{What keeps the answer honest.} The model becomes useful only when I can apply aggregate supply, unemployment, and expectations to an unfamiliar case and defend the assumptions.
  \item \textbf{Mastery standard.} I can define the objects, rebuild the rule, work a fresh case, compare alternatives, and diagnose a broken solution without relying on recognition.
\end{itemize}

\begin{studenttake}
My shorthand for this chapter is: my shorthand for this chapter is: expected inflation moves the whole short-run tradeoff, so yesterday's policy rule becomes part of today's model.
\end{studenttake}

\begin{plainbox}
Price and wage stickiness create short-run output gaps.
\end{plainbox}

\begin{examplebox}
\textbf{Question.} What happens if actual inflation repeatedly exceeds expected inflation?

\textbf{Walkthrough.} Contracts and forecasts eventually adjust upward, shifting the short-run Phillips curve. Output cannot remain permanently above potential through surprise inflation alone.
\end{examplebox}

\begin{warningbox}
The fastest way to get this chapter wrong is to use the visible procedure without naming its assumption, units, time period, reference group, or boundary. I put that condition beside the work and verify the result independently.
\end{warningbox}

\begin{chapterpractice}
\textbf{Practice 1.} What happens if actual inflation repeatedly exceeds expected inflation?

\textbf{Solution.} Contracts and forecasts eventually adjust upward, shifting the short-run Phillips curve. Output cannot remain permanently above potential through surprise inflation alone.

\medskip
\textbf{Practice 2.} Explain aggregate supply, unemployment, and expectations to a classmate using one definition, one concrete example, one assumption, and one failure mode.

\textbf{Solution.} Begin with the core claim above, use the worked case as the concrete example, state the condition highlighted by the warning, and choose a failure where that condition does not hold. A complete explanation connects all four pieces instead of listing them.

\medskip
\textbf{Mastery practice A.} Reconstruct aggregate supply, unemployment, and expectations from a blank page. Include the central definition, the governing rule, one required assumption, and one boundary case.

\textbf{Solution.} Start from the blue idea box, but rewrite it in my own words. Identify the objects and state, name the rule before using it, copy the relevant assumption from the details audit, and choose a boundary where that assumption becomes equality or fails. A complete solution explains why each part belongs; a list of vocabulary is not enough.

\medskip
\textbf{Mastery practice B.} A classmate gets a polished-looking answer to a aggregate supply, unemployment, and expectations problem but never states a model or checks the result. Write the shortest useful review of that solution.

\textbf{Solution.} I would ask four concrete questions: What exactly are the inputs and desired output? Which rule licenses the main step? Which assumption could invalidate it? Which independent check supports the conclusion? If the answer cannot survive those four questions, I treat the numerical or verbal result as unverified.

\end{chapterpractice}

\section{Monetary and fiscal stabilization}

\begin{idea}
Policy design weighs inflation and output goals, lags, credibility, automatic stabilizers, debt dynamics, multipliers, financial stability, and distribution. Rules and discretion trade commitment against flexibility.
\end{idea}
% MASTERCLASS EXPANSION
\subsection{Rebuild the chapter from first principles}
The claim I need to own is this: Policy design weighs inflation and output goals, lags, credibility, automatic stabilizers, debt dynamics, multipliers, financial stability, and distribution. Rules and discretion trade commitment against flexibility. I do not count that as learned just because the sentence looks familiar. I should be able to name the objects, state what changes and what stays fixed, recover the rule from the definitions, and explain why the result is allowed.

\begin{move}
\textbf{My working sequence}
\begin{enumerate}
  \item \textbf{Translate.} Rewrite the prompt in the language of monetary and fiscal stabilization. List the known quantities, the unknown, the units or types, and any hidden constraint.
  \item \textbf{Choose.} State the theorem, model, algorithm, accounting rule, or physical law before substituting values. This is where I make the assumption visible.
  \item \textbf{Execute.} Work one justified step at a time and keep intermediate state readable enough that I can audit it later.
  \item \textbf{Verify.} Check a boundary case, sign, unit, invariant, order of magnitude, or alternative derivation. Then translate the result back into an ordinary sentence.
\end{enumerate}
\end{move}

\subsection{Details I would refuse to skip}
\begin{itemize}
  \item \textbf{Definitions:} I should be able to define every technical noun in the chapter without using that same noun in the definition.
  \item \textbf{Assumptions:} I write the condition that makes the method legal beside the method itself. A correct procedure under the wrong assumptions is still a wrong answer.
  \item \textbf{Representation:} I move freely among words, equations or code, a diagram, and a small numerical example. If one representation disagrees with another, that disagreement is useful evidence.
  \item \textbf{Failure modes:} I keep the nearest counterexample in mind: the boundary where the rule changes, the invariant breaks, or the model stops matching reality.
  \item \textbf{Communication:} My final answer names what the result means and what it does not establish. I do not let notation do the explanatory work for me.
\end{itemize}

\begin{sanitybox}
\textbf{Closed-note check.} Can I teach monetary and fiscal stabilization on a blank page, derive or reconstruct its main rule, work a fresh example, and diagnose a deliberately broken solution? If I can only recognize the finished work, I am not done.
\end{sanitybox}

\subsection{How this chapter connects}
I read this chapter as the bridge from aggregate supply, unemployment, and expectations to open-economy macro and business cycles. The earlier material supplies the language and constraints; this chapter adds a new reasoning move; the later material asks me to use that move without being told its name. That connection matters because exams and real projects mix chapters on purpose.


\subsection{The full working model}
\begin{itemize}
  \item \textbf{Core claim.} Policy design weighs inflation and output goals, lags, credibility, automatic stabilizers, debt dynamics, multipliers, financial stability, and distribution.
  \item \textbf{What moves.} Rules and discretion trade commitment against flexibility.
  \item \textbf{What keeps the answer honest.} The model becomes useful only when I can apply monetary and fiscal stabilization to an unfamiliar case and defend the assumptions.
  \item \textbf{Mastery standard.} I can define the objects, rebuild the rule, work a fresh case, compare alternatives, and diagnose a broken solution without relying on recognition.
\end{itemize}

\begin{studenttake}
I evaluate policy by state contingency and implementation, not by whether I generally like 'more' or 'less' government.
\end{studenttake}

\begin{plainbox}
Policy design weighs inflation and output goals, lags, credibility, automatic stabilizers, debt dynamics, multipliers, financial stability, and distribution.
\end{plainbox}

\begin{examplebox}
\textbf{Question.} Why may an automatic stabilizer act faster than discretionary policy?

\textbf{Walkthrough.} Tax payments and transfers respond mechanically to income and unemployment without waiting for new legislation, though their size and targeting depend on existing program design.
\end{examplebox}

\begin{warningbox}
The fastest way to get this chapter wrong is to use the visible procedure without naming its assumption, units, time period, reference group, or boundary. I put that condition beside the work and verify the result independently.
\end{warningbox}

\begin{chapterpractice}
\textbf{Practice 1.} Why may an automatic stabilizer act faster than discretionary policy?

\textbf{Solution.} Tax payments and transfers respond mechanically to income and unemployment without waiting for new legislation, though their size and targeting depend on existing program design.

\medskip
\textbf{Practice 2.} Explain monetary and fiscal stabilization to a classmate using one definition, one concrete example, one assumption, and one failure mode.

\textbf{Solution.} Begin with the core claim above, use the worked case as the concrete example, state the condition highlighted by the warning, and choose a failure where that condition does not hold. A complete explanation connects all four pieces instead of listing them.

\medskip
\textbf{Mastery practice A.} Reconstruct monetary and fiscal stabilization from a blank page. Include the central definition, the governing rule, one required assumption, and one boundary case.

\textbf{Solution.} Start from the blue idea box, but rewrite it in my own words. Identify the objects and state, name the rule before using it, copy the relevant assumption from the details audit, and choose a boundary where that assumption becomes equality or fails. A complete solution explains why each part belongs; a list of vocabulary is not enough.

\medskip
\textbf{Mastery practice B.} A classmate gets a polished-looking answer to a monetary and fiscal stabilization problem but never states a model or checks the result. Write the shortest useful review of that solution.

\textbf{Solution.} I would ask four concrete questions: What exactly are the inputs and desired output? Which rule licenses the main step? Which assumption could invalidate it? Which independent check supports the conclusion? If the answer cannot survive those four questions, I treat the numerical or verbal result as unverified.

\end{chapterpractice}

\section{Open-economy macro and business cycles}

\begin{idea}
International capital flows connect saving, investment, exchange rates, and policy. Mundell-Fleming logic depends on exchange-rate regime and capital mobility; real-business-cycle and New Keynesian views emphasize different shocks and propagation.
\end{idea}
% MASTERCLASS EXPANSION
\subsection{Rebuild the chapter from first principles}
The claim I need to own is this: International capital flows connect saving, investment, exchange rates, and policy. Mundell-Fleming logic depends on exchange-rate regime and capital mobility; real-business-cycle and New Keynesian views emphasize different shocks and propagation. I do not count that as learned just because the sentence looks familiar. I should be able to name the objects, state what changes and what stays fixed, recover the rule from the definitions, and explain why the result is allowed.

\begin{move}
\textbf{My working sequence}
\begin{enumerate}
  \item \textbf{Translate.} Rewrite the prompt in the language of open-economy macro and business cycles. List the known quantities, the unknown, the units or types, and any hidden constraint.
  \item \textbf{Choose.} State the theorem, model, algorithm, accounting rule, or physical law before substituting values. This is where I make the assumption visible.
  \item \textbf{Execute.} Work one justified step at a time and keep intermediate state readable enough that I can audit it later.
  \item \textbf{Verify.} Check a boundary case, sign, unit, invariant, order of magnitude, or alternative derivation. Then translate the result back into an ordinary sentence.
\end{enumerate}
\end{move}

\subsection{Details I would refuse to skip}
\begin{itemize}
  \item \textbf{Definitions:} I should be able to define every technical noun in the chapter without using that same noun in the definition.
  \item \textbf{Assumptions:} I write the condition that makes the method legal beside the method itself. A correct procedure under the wrong assumptions is still a wrong answer.
  \item \textbf{Representation:} I move freely among words, equations or code, a diagram, and a small numerical example. If one representation disagrees with another, that disagreement is useful evidence.
  \item \textbf{Failure modes:} I keep the nearest counterexample in mind: the boundary where the rule changes, the invariant breaks, or the model stops matching reality.
  \item \textbf{Communication:} My final answer names what the result means and what it does not establish. I do not let notation do the explanatory work for me.
\end{itemize}

\begin{sanitybox}
\textbf{Closed-note check.} Can I teach open-economy macro and business cycles on a blank page, derive or reconstruct its main rule, work a fresh example, and diagnose a deliberately broken solution? If I can only recognize the finished work, I am not done.
\end{sanitybox}

\subsection{How this chapter connects}
I read this chapter as the bridge from monetary and fiscal stabilization to the cumulative course model. The earlier material supplies the language and constraints; this chapter adds a new reasoning move; the later material asks me to use that move without being told its name. That connection matters because exams and real projects mix chapters on purpose.


\subsection{The full working model}
\begin{itemize}
  \item \textbf{Core claim.} International capital flows connect saving, investment, exchange rates, and policy.
  \item \textbf{What moves.} Mundell-Fleming logic depends on exchange-rate regime and capital mobility; real-business-cycle and New Keynesian views emphasize different shocks and propagation.
  \item \textbf{What keeps the answer honest.} The model becomes useful only when I can apply open-economy macro and business cycles to an unfamiliar case and defend the assumptions.
  \item \textbf{Mastery standard.} I can define the objects, rebuild the rule, work a fresh case, compare alternatives, and diagnose a broken solution without relying on recognition.
\end{itemize}

\begin{studenttake}
I name the exchange-rate regime before predicting policy effects.
\end{studenttake}

\begin{plainbox}
International capital flows connect saving, investment, exchange rates, and policy.
\end{plainbox}

\begin{examplebox}
\textbf{Question.} Under high capital mobility and a fixed exchange rate, why is independent monetary policy constrained?

\textbf{Walkthrough.} A rate change triggers capital flows and pressure on the peg. Defending the fixed rate forces offsetting reserve operations, limiting autonomous monetary policy.
\end{examplebox}

\begin{warningbox}
The fastest way to get this chapter wrong is to use the visible procedure without naming its assumption, units, time period, reference group, or boundary. I put that condition beside the work and verify the result independently.
\end{warningbox}

\begin{chapterpractice}
\textbf{Practice 1.} Under high capital mobility and a fixed exchange rate, why is independent monetary policy constrained?

\textbf{Solution.} A rate change triggers capital flows and pressure on the peg. Defending the fixed rate forces offsetting reserve operations, limiting autonomous monetary policy.

\medskip
\textbf{Practice 2.} Explain open-economy macro and business cycles to a classmate using one definition, one concrete example, one assumption, and one failure mode.

\textbf{Solution.} Begin with the core claim above, use the worked case as the concrete example, state the condition highlighted by the warning, and choose a failure where that condition does not hold. A complete explanation connects all four pieces instead of listing them.

\medskip
\textbf{Mastery practice A.} Reconstruct open-economy macro and business cycles from a blank page. Include the central definition, the governing rule, one required assumption, and one boundary case.

\textbf{Solution.} Start from the blue idea box, but rewrite it in my own words. Identify the objects and state, name the rule before using it, copy the relevant assumption from the details audit, and choose a boundary where that assumption becomes equality or fails. A complete solution explains why each part belongs; a list of vocabulary is not enough.

\medskip
\textbf{Mastery practice B.} A classmate gets a polished-looking answer to a open-economy macro and business cycles problem but never states a model or checks the result. Write the shortest useful review of that solution.

\textbf{Solution.} I would ask four concrete questions: What exactly are the inputs and desired output? Which rule licenses the main step? Which assumption could invalidate it? Which independent check supports the conclusion? If the answer cannot survive those four questions, I treat the numerical or verbal result as unverified.

\end{chapterpractice}

\section*{Cumulative study plan}
I use this packet in three passes. First I reconstruct each model and work its examples without looking. Second I mix chapters so the tool is no longer named for me. Third I explain a complete case aloud, including assumptions, units, uncertainty, failure modes, and what evidence would change my conclusion.

\end{document}
