Macroeconomics: Theory of Consumption, Investment, and Asset Pricing

Why do households save, and how do firms decide where to invest? Understanding these micro-foundations of aggregate behavior is crucial for analyzing economic policy, growth, and financial markets. This course provides a robust theoretical toolkit to analyze aggregate consumption, capital accumulation, and the fundamental forces determining asset prices, moving beyond simple textbook definitions. What you'll learn: Understand the dynamic optimization problems underlying modern consumption theory, such as the Permanent Income Hypothesis. Analyze the key theoretical models of firm investment, including the Q theory and neoclassical approaches to capital accumulation. Master the foundations of asset pricing, including the Consumption Capital Asset Pricing Model (CCAPM) and risk-return relationships. Learn how empirical evidence challenges classical models and motivates extensions using dynamic and behavioral economics concepts. Apply theoretical frameworks to interpret current macroeconomic data and policy debates related to saving, wealth distribution, and capital formation. The course begins with foundational concepts of intertemporal optimization and rational expectations, progresses through the core dynamic models of individual decision-making, and concludes with their aggregation and application to financial markets. This course is designed for absolute beginners in advanced macroeconomics or finance who seek a rigorous, text-based introduction to the underlying theories of economic behavior. No prior advanced economic knowledge is required. Start building your theoretical foundation today.