Macro: Life from space
In Chapters 1–10 we explored life on a small scale. Hopefully you now have a deeper understanding of how market forces affect your everyday life. But now we leave the market square behind and instead turn our gaze to life on a large scale. In macroeconomics we study the entire economy. You can imagine zooming out in Google Earth from the market trade in Åbo until you can see the whole of Finland. Alternatively, watch the webcam below that livestreams from the ISS.
Lecture notes in macroeconomics here.
The space station orbits Earth at an altitude of 430 kilometres and at a speed of almost 28 000 kilometres per hour. Which country is the ISS passing over right now — and how do you think living standards are there? As I write this — Wednesday 17 June 2026 at 09:23 — the station is passing over the Congo, where three quarters of the population live in extreme poverty. In 2000, 16 per cent of children in the Congo died before their fifth birthday. In the chapters ahead we will investigate why the Congolese are so poor. Is there something in their DNA that condemns them to a life of misery — or is there something they can do to escape famine?
microeconomics focuses on the small components of the economy, such as individuals, firms and individual markets
macroeconomics analyses the large‑scale aspects of the economy, such as GDP, unemployment and inflation
If you’re lucky you might see the ISS pass over the Korean Peninsula. In that case you’ll see the same pattern as in this satellite image:
Why is it so bright in South Korea but pitch black in North Korea? Do you think North Koreans — like the Congolese — are condemned to a life of perpetual darkness? How, then, can you explain that the two halves were roughly equally prosperous when Korea was divided in 1953? Same genes, same history, same climate — yet the southern half now lives in luxury while the north starves. Understanding why some countries have become rich while others remain poor is a central question for the macroeconomist. Someone who knows how to fight poverty effectively can make a substantial practical difference. For example, the Congo has managed to halve its child mortality rate since the turn of the millennium, which in practice means saving 262,400 children’s lives every year. No one can say macroeconomics is unimportant.
But macroeconomists are also interested in shorter‑term fluctuations in the economy. Right now Finland, for instance, is in an economic downturn that will not have escaped any Finn. It is as if a wet blanket has suddenly been thrown over the whole country: firms go bankrupt, newly graduated students find it extremely difficult to get jobs, and the poor state of the economy forces cuts from student grants to the number of major subjects at Åbo Akademi. In other years things are instead splendid, and you who have just finished your studies get a flying start to your career because you can pick and choose from many attractive and well‑paid jobs. What actually causes these violent swings between good and bad times? Are they inevitable, or can, for example, Unna at the Ministry of Finance in Figure 1 steer the economy in a desirable direction?
These were two examples of what macroeconomics is about, but there are many other fascinating patterns we want to understand. So let’s get started.
Crucial for your success at university is often your study technique. Unfortunately it can take several terms before you realise how to study in a way that actually works. I, for one, failed the introductory course in economics, and the same happened to the majority of the economics lecturers at Åbo Akademi when they were students. I didn’t get my first grade 4 or 5 until the end of my second year. Much of that was due to my lousy study technique.
I therefore think it can be a smart investment to go back to the start of this e‑book and re‑read the section Study tips for university.
A very common mistake among students at Åbo Akademi, at all levels, is that they don’t prepare sufficiently well for the exam itself. Using an abstract model to explain a current societal problem in a comprehensible way is hard – and doing it for the very first time is incredibly hard. A downhill skier who wants Olympic gold must have practised the run many times in advance – and the same applies to you as a student. Here is a concrete proposal for anyone who wants to raise their grades across all courses:
- Work diligently with the course book from day one. For example, identify the five most important lessons, models or techniques from each chapter and learn them thoroughly.
- Then test yourself by explaining and drawing for a friend. Ask them to press you hard with follow‑up questions: What do you do now? What does that term mean? Why does that curve look like that? What can we learn about society from what you are talking about now? Teaching others is often a very effective way to yourself learn material. An alternative is to create your own written exam questions from the course material. If you find it difficult, AI can help you the first time. Then write down the best possible answers to your own questions (of course without peeking in the book).
- Critically evaluate your answers: What can be improved? Can a listener or reader actually understand what you mean, or did everything just turn into mush? Do you think your teacher would be impressed by your answers, or do they look sloppy and ill‑considered? Could you answer everything your friend asked? (Remember that AI can also give constructive feedback on both written and oral answers.)
- Repeat steps 1–3 until your answers are at the grade level you aim for. Of course, also remember to participate actively in as many lectures as possible. Good luck!