Materials to be presented in this course are classified into two parts, with a common theme of emphasizing micro foundations. The first part devotes to the study of two major components of aggregate demand: consumption and investment. The concepts and techniques used therein have become the working horses of many modern theories, and the related empirical issues are among the most enduring research topics. In the second part of the course, we will study the aggregate supply function. Various theories will be introduced to explain how the observed price-output correlation at the aggregate level arises from agent’s optimization behaviors at the individual level. Here we’ll have a taste of the New Keynesian theory.