This Q&A-style economics lecture focuses on understanding macroeconomic fluctuations and their impact on individuals, businesses, and policymakers. The lecture begins by illustrating the concept of irrational decision-making under uncertainty through a classroom experiment involving discounted cash flow analysis. It then moves into defining and analyzing inflation, its costs (shoe-leather costs, menu costs, and the distortion of economic measures), and the difference between expected and unexpected inflation. Finally, it introduces the aggregate demand-aggregate supply (ADAS) model to explain short-run and long-run economic equilibrium, using historical examples like the Great Depression and the 1970s oil shocks to illustrate different types of economic shocks and their effects. Listeners gain a practical understanding of macroeconomic concepts and how they affect daily life, such as the impact of inflation on purchasing power and the role of government policies in addressing economic downturns. The lecture concludes with a discussion of the sunk cost fallacy using a classroom auction experiment.
