MacroeconomicsMacroeconomics

Chapter One Chapter One IntroductionIntroduction

Macroeconomics : Macroeconomics :

1.1. Definition - macroeconomics is Definition - macroeconomics is concerned with the behavior of concerned with the behavior of the economy as a whole-----the economy as a whole-----booms and recessions, peaks booms and recessions, peaks and troughs; GDP; the rate of and troughs; GDP; the rate of growth, inflation, growth, inflation, unemployment; BOP; Exchange unemployment; BOP; Exchange Rate…… Rate……

Some Key ConceptsSome Key Concepts

2. Research method: Aggregate 2. Research method: Aggregate ---- Goods , ---- Goods , Labor , Assets markets, International Labor , Assets markets, International Finance and Trade Finance and Trade

---- and Interactions among them---- and Interactions among them GDP(Gross domestic product) ---is GDP(Gross domestic product) ---is

the value of all final goods and the value of all final goods and services produced in the economy in services produced in the economy in a given period of timea given period of time

Three important distinctions must be made: Three important distinctions must be made:

1. Nominal versus real GDP 1. Nominal versus real GDP

current year price current year price

base year price base year price 2. GDP Versus GDP per capita 2. GDP Versus GDP per capita

3. The growth of GDP 3. The growth of GDP

available amount of resources available amount of resources

efficiency of production efficiency of production

the use of the factors of productionthe use of the factors of production

Consumption Consumption Investment Investment

Money SupplyMoney Supply Fiscal Surplus and DeficitFiscal Surplus and Deficit Unemployment RateUnemployment Rate Exchange RatesExchange Rates

Three central issues in the research Three central issues in the research

agenda: agenda:

1. How do we explain periods of high and 1. How do we explain periods of high and

persistent unemployment? persistent unemployment?

2. How do we explain inflation? 2. How do we explain inflation?

3. What determines economic 3. What determines economic

growth? growth? Relationships Among Macroeconomic Relationships Among Macroeconomic

VariablesVariables

1. Growth and Unemployment 1. Growth and Unemployment

Okun`s Okun`s

Law :Law : 　 △　 △ U = - U = -

0.5 (y - 2.25) 0.5 (y - 2.25)

2. Inflation and Business Cycle 2. Inflation and Business Cycle

3. 3.

Inflation and Unemployment Tradeoffs: Inflation and Unemployment Tradeoffs:

Phillips CurvePhillips Curve : :

Macroeconomic Theory System Macroeconomic Theory System

1. Framework (insert Figure) 1. Framework (insert Figure)

2. Three 2. Three

main analytical tools main analytical tools

Keynesian Model Keynesian Model

IS-LM Model IS-LM Model

AD-AS ModelAD-AS Model

Fleming-Mundell ModelFleming-Mundell Model

3. Some Topics3. Some Topics

Consumption theoryConsumption theory

Investment TheoryInvestment Theory

MultiplierMultiplier

Supply and Demand of MoneySupply and Demand of Money

Basic concepts of international Basic concepts of international economicseconomics

UnemploymentUnemployment

InflationInflation

Economic GrowthEconomic Growth

Macroeconomic Policy Macroeconomic Policy

1. Aims of Policy 1. Aims of Policy

Full employment ; stability of Full employment ; stability of

price; economic growth ; balance of price; economic growth ; balance of

payments 2.Contradictions payments 2.Contradictions

Among different aims 3.Policy tools Among different aims 3.Policy tools

Fiscal polices ; Monetary policesFiscal polices ; Monetary polices