Macroeconomics. Introduction

Сентябрь 11, 2022

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Macroeconomics. Introduction

Содержание

2. Introduction Structure of course Chapter 1 The date and methods of macroeconomics Chapter 2-4 The National
3. Introduction Structure of course Chapter 5 The Determination of Output, Income, Expenditure and a Model of
4. Introduction Structure of course Chapter 7 Labour Market, Employment, Unemployment Chapter 8 Economic Fluctuations
5. Introduction Structure of course Chapter 9 The Keynsian Model of Short-Run Equilibrium Chapter 10 Aggregate Supply
6. Introduction Definition “Macroeconomics was born as distinct in the 1940, as part of intellectual response to
7. Introduction Definition Since then, economic science is divided into two fields Microeconomics, which develops the theories
8. Introduction Definition Since then, economic science is divided into two fields Macroeconomics, which develops the theories
9. Introduction Relationships between two sub- disciplines Examples - how agents see the future and build their
10. Introduction An overview of the macroeconomic theories Two main theories: - Classical theory gives a central
11. Introduction An overview of the macroeconomic theories Classical theory- economic policies are not helpful. Market can
12. Introduction An overview of the macroeconomic theories Keynesian theory – economic policies are useful because the
13. Introduction An overview of the macroeconomic theories Classical theory- Hypothesis of flexible prices, macroeconomic theories may
14. Introduction An overview of the macroeconomic theories Keynsian theory helps to explain the short-run fluctuations in
15. Introduction The Empirical Aspects of the Macro-economics The macro circuit means a non-theoretical representation of economic
16. Introduction The Empirical Aspects of the Macro-economics The output is the value, expressed in money. This
17. Introduction The Empirical Aspects of the Macro-economics Expenditure means the money value of purchases of goods
18. Introduction The Empirical Aspects of the Macro-economics Macroeconomic subjects
19. Introduction The Empirical Aspects of the Macro-economics OUTPUT=INCOME=EXPENDITURE
20. Introduction The measurement of macroeconomic facts Economic variables -Stock variables measure a quantity at a given
21. Introduction The measurement of macroeconomic facts Measurement of output The nominal output QV ALt =q At
22. Introduction The measurement of macroeconomic facts Measurement of output The real output QVOLt = ∑qit x
23. Introduction The measurement of macroeconomic facts Measurement the changes Measurement of price changes I (P) t/t-k
24. Introduction The measurement of macroeconomic facts Measurement the productivity Y/H hourly labour productivity
25. Introduction Methods and Assumptions of Macro-economic What is a model? Model is a theoretical construct designed
26. Introduction Methods and Assumptions of Macro-economic What is a model? Example- a model of economic equilibrium
27. The determination of Output, Income, Expenditure and a model of Real Equilibrium The production function and
28. The determination of Output, Income, Expenditure and a model of Real Equilibrium The production function and
29. The determination of Output, Income, Expenditure and a model of Real Equilibrium The production function and
30. The determination of Output, Income, Expenditure and a model of Real Equilibrium The production function and
31. The determination of Output, Income, Expenditure and a model of Real Equilibrium The production function and
32. The determination of Output, Income, Expenditure and a model of Real Equilibrium The production function and
33. The determination of Output, Income, Expenditure and a model of Real Equilibrium The production function and
34. The determination of Output, Income, Expenditure and a model of Real Equilibrium The distribution of national
35. The determination of Output, Income, Expenditure and a model of Real Equilibrium The distribution of national
36. The determination of Output, Income, Expenditure and a model of Real Equilibrium The distribution of national
37. The determination of Output, Income, Expenditure and a model of Real Equilibrium The distribution of national
38. The determination of Output, Income, Expenditure and a model of Real Equilibrium The expense of national
39. The determination of Output, Income, Expenditure and a model of Real Equilibrium The expense of national
40. The determination of Output, Income, Expenditure and a model of Real Equilibrium The expense of national
41. The determination of Output, Income, Expenditure and a model of Real Equilibrium The expense of national
42. The determination of Output, Income, Expenditure and a model of Real Equilibrium The expense of national
43. The determination of Output, Income, Expenditure and a model of Real Equilibrium The expense of national
44. The determination of Output, Income, Expenditure and a model of Real Equilibrium The expense of national
45. The determination of Output, Income, Expenditure and a model of Real Equilibrium The expense of national
46. The determination of Output, Income, Expenditure and a model of Real Equilibrium The expense of national
47. The determination of Output, Income, Expenditure and a model of Real Equilibrium The equilibrium in the
48. The determination of Output, Income, Expenditure and a model of Real Equilibrium The equilibrium in the
49. The determination of Output, Income, Expenditure and a model of Real Equilibrium The equilibrium in the
50. The determination of Output, Income, Expenditure and a model of Real Equilibrium The impact of budget
51. Money, prices and interest rates What is the impact of change in the quantity of money
52. Money, prices and interest rates Money is one of the asset which is the easiest to
53. Money, prices and interest rates Agents will want to have a greater or lesser amount of
54. Money, prices and interest rates The Quantity theory of money MV=PY V=PY/M =nominal GDP/Money stock
55. Money, prices and interest rates The Quantity theory of money Demand for money Md=(1/V)PY 1/V=k Md
56. Money, prices and interest Rates The Interest Rate, the demand for money and Inflation The nominal
57. Money, prices and interest Rates The Interest Rate, the demand for money and Inflation NIR and
58. Money, prices and interest Rates The Interest Rate, the demand for money and Inflation NIR depends
59. Money, prices and interest Rates Interest rate and money demand Md/P = L(i,Y) Demand for real
60. Money, prices and interest Rates The money supply and expected price level M/P =Md/P M/P=L (i,
61. Money, prices and interest rates The money supply and expected price level M/P=L (r+ הּe, Y
62. Money, prices and interest rates The Problems with Too Large Fluctuation in Price Level Inflation is
63. Money, prices and interest rates The Problems with Too Large Fluctuation in Price Level Deflation is
64. Labour market, employment, unemployment Labour demand comes from com-panies that want to produce. Labour supply comes
65. Labour market, employment, unemployment The labour force is an aggregate that includes the employed labour force
66. Labour market, employment, unemployment The labour force is an aggregate that includes the employed labour force
67. Labour market, employment, unemployment The labour force is an aggregate that includes the employed labour force
68. Labour market, employment, unemployment N=E+U+I N=15-64 years old a= (E+U)/N e=E/N u=U/(E+U) a=e/(1-u)
69. Labour market, employment, unemployment Share of long length unemployed (those unemployed for one year and more)
70. Labour market, employment, unemployment The flow of workers It is the number of people who, over
71. The Long-Run Rate of Unemployment L =E+U u=U/L Job acquisition rate a=A/U percentage of unemployed during
72. The Long-Run Rate of Unemployment L =E+U u=U/L Job loss rate p=P/U percentage of employees who
73. The Long-Run Rate of Unemployment Natural rate of unemployment=long-run rate of unemployment A=P
74. Economic fluctuations The economy is experiencing fluctuations that result in variations in the level of output
75. Economic fluctuations Acceleration phases (economic boom) Contraction phase (economic recession)
76. Economic fluctuations Changes in output and unemployment When the economy is bad, cyclical unemployment, adds to
77. Economic fluctuations Changes in output and unemployment When the economy is bad, cyclical unemployment, adds to
78. Economic fluctuations Changes in output and unemployment When the economy is bad, cyclical unemployment, adds to
79. Economic fluctuations Aggregate demand and aggregate supply The aggregate demand is deduced from the quantity aquation
80. Economic fluctuations Aggregate demand and aggregate supply The aggregate supply The long-run aggregate supply (LRAS) Production
81. Economic fluctuations Aggregate demand and aggregate supply AS-AD model Long-run effect of change in AD In
82. Economic fluctuations Aggregate demand and aggregate supply AS-AD model Short-run effect of change in AD In
83. Economic fluctuations Aggregate demand and aggregate supply AS-AD model The Effect of Monetary Policy The Central
84. Economic fluctuations Aggregate demand and aggregate supply AS-AD model The Effect of Monetary Policy 1) a
85. Economic fluctuations Aggregate demand and aggregate supply AS-AD model The Effect of Monetary Policy 1) a
86. Economic fluctuations Aggregate demand and aggregate supply AS-AD model The Effect of Monetary Policy 1) a
87. Economic fluctuations External shock –an event that affects suddenly the economy and rules out output of
88. The Keynesian Model of Short-Run Equilibrium Model IS-LM Keynesian Macroeconomics (KM) - prices are sticky in
89. The Keynesian Model of Short-Run Equilibrium Model IS-LM Keynesian Macroeconomics (KM) C=c(Y-T) E=c (Y-T)+I+G E=cY+(I+G-cT) Keynesian
90. The Keynesian Model of Short-Run Equilibrium Model IS-LM The impact of budget policy ∆Y=(1/1-c)/ ∆G ∆
91. The Keynesian Model of Short-Run Equilibrium Model IS-LM The impact of budget policy Balanced budget ∆Y=
92. The Keynesian Model of Short-Run Equilibrium Model IS-LM I =I(r) IS curve shows all possible com-binations
93. The Keynesian Model of Short-Run Equilibrium Model IS-LM Budget policy and IS-curve - An increase in
94. The Keynesian Model of Short-Run Equilibrium Model IS-LM Money market and LM Curve The money supply
95. The Keynesian Model of Short-Run Equilibrium Model IS-LM Money market and LM Curve The demand for
96. The Keynesian Model of Short-Run Equilibrium Model IS-LM Definition: the LM curve represents all possible combinations
97. The Keynesian Model of Short-Run Equilibrium Model IS-LM Short-Run Equilibrium Y=C(Y-T)+I(r)+G M/P=L(i,Y)
98. The Keynesian Model of Short-Run Equilibrium Model IS-LM Economic Policy through the IS-LM model. The stabilization
99. The Keynesian Model of Short-Run Equilibrium Model IS-LM Economic Policy through the IS-LM model. The stabilization
100. The Keynesian Model of Short-Run Equilibrium Model IS-LM IS-LM and aggregate demand IS-LM and deflation
101. Aggregate Supply LRAS –level of output is determined only by amounts of factors available. SRAS is
102. Aggregate Supply Nominal wage rigidity w=W/Pe W/P=wxPe/P
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Слайд 2

Introduction
Structure of course
Chapter 1 The date and methods of macroeconomics
Chapter

2-4 The National Accounting system (not included)

Слайд 3

Introduction
Structure of course
Chapter 5 The Determination of Output, Income, Expenditure and

a Model of Real Equilibrium
Chapter 6 Money, Prices and the Interest Rate

Слайд 4

Introduction
Structure of course
Chapter 7 Labour Market, Employment, Unemployment
Chapter 8 Economic

Fluctuations

Слайд 5

Introduction
Structure of course
Chapter 9 The Keynsian Model of
Short-Run Equilibrium

Chapter 10 Aggregate Supply

Слайд 6

Introduction
Definition
“Macroeconomics was born as distinct in the 1940, as part

of intellectual response to the Great Depression. The term then referred to the body of knowledge and expertise that we hoped would prevent recurrence of that economic disaster..”
(R. Lucas)

Слайд 7

Introduction
Definition
Since then, economic science is divided into two fields

Microeconomics, which develops the theories of individual behaviors: theories of producer, consumer, etc.

Слайд 8

Introduction
Definition
Since then, economic science is divided into two fields

Macroeconomics, which develops the theories of collective behaviors
The main goal of macroeconomics is to explain and predict the evolution of different economic variables, such as output, employment, money supply, interest rates, prices, exchange rates, external balance, public budget deficit, public debt

Слайд 9

Introduction
Relationships between two sub-
disciplines
Examples
- how

agents see the future and build their expectations (micro) can influence the level of overall consumption (macro)
- the level of public deficit (macro) can get people to change their saving behaviours (micro)

Слайд 10

Introduction
An overview of the macroeconomic theories
Two main theories:
-

Classical theory gives a central place to the notion of equilibrium
- Keynesian theory – “ sticky prices macroeconomics”

Слайд 11

Introduction
An overview of the macroeconomic theories
Classical theory- economic policies are not

helpful. Market can be cleared in the short run without the necessity of external intervention.

Слайд 12

Introduction
An overview of the macroeconomic theories
Keynesian theory – economic policies are

useful because the return to equilibrium for the economy is neither automatic nor immediate.

Слайд 13

Introduction
An overview of the macroeconomic theories
Classical theory-
Hypothesis of flexible prices, macroeconomic

theories may be useful to explain the functioning of the economy in the long run.

Слайд 14

Introduction
An overview of the macroeconomic theories
Keynsian theory helps to explain the

short-run fluctuations in the level of activity that generate disequilibrium.

Слайд 15

Introduction
The Empirical Aspects of the Macro-economics
The macro circuit means a non-theoretical

representation of economic activity.
Three macroeconomic aggre-gates: global output, global income, global expenditure.

Слайд 16

Introduction
The Empirical Aspects of the Macro-economics
The output is the value, expressed

in money. This is a monetary consideration of the production activity.
Income means the monetary value of resources received by agents

Слайд 17

Introduction
The Empirical Aspects of the Macro-economics
Expenditure means the money value of

purchases of goods and services made by economic agents.

Слайд 18

Introduction
The Empirical Aspects of the Macro-economics
Macroeconomic subjects

Слайд 19

Introduction
The Empirical Aspects of the Macro-economics
OUTPUT=INCOME=EXPENDITURE

Слайд 20

Introduction
The measurement of macroeconomic facts
Economic variables
-Stock variables measure a quantity

at a given date (number of unemployed in March 31).
-Flow variables measure a magnitude between two dates (consumption expenditure of households in 2010).

Слайд 21

Introduction
The measurement of macroeconomic facts
Measurement of output
The nominal output
QV

ALt =q At x pAt+qBtxpBt
- QV ALt = ∑qit pit

Слайд 22

Introduction
The measurement of macroeconomic facts
Measurement of output
The real output
QVOLt = ∑qit

x pi0

Слайд 23

Introduction
The measurement of macroeconomic facts
Measurement the changes
Measurement of price changes
I

(P) t/t-k =(Pt /Pt-k) x100
- Measurement of living standard in the country

Слайд 24

Introduction
The measurement of macroeconomic facts
Measurement the productivity
Y/H hourly labour productivity

Слайд 25

Introduction
Methods and Assumptions of Macro-economic
What is a model?

Model is a theoretical construct designed to provide a simplified presentation of reality.

Слайд 26

Introduction
Methods and Assumptions of Macro-economic
What is a model?

Example- a model of economic equilibrium

Слайд 27

The determination of Output, Income, Expenditure and a model of Real

Equilibrium

The production function and aggregate supply
Y=F (K,L)
Output will depend on amounts of factor use but also on returns to scale

Слайд 28

The determination of Output, Income, Expenditure and a model of Real

Equilibrium

The production function and aggregate supply
F (λK,λL)= λzY
z=1 constant returns to scale
Z<1 decreasing returns to scale
Z>1 increasing returns to scale

Слайд 29

The determination of Output, Income, Expenditure and a model of Real

Equilibrium

The production function and aggregate supply
Y=Ka L (1-a) - Cobb-Douglas function
Aggregate supply =F (K, L)?Y

Слайд 30

The determination of Output, Income, Expenditure and a model of Real

Equilibrium

The production function and aggregate supply
Profit maximization
Profit= PY-WL-RK
= PxF (K,L)-WL-RK

Слайд 31

The determination of Output, Income, Expenditure and a model of Real

Equilibrium

The production function and aggregate supply
MPL marginal product of labour
MPL=F(K, L+1)-F (K,L)

Слайд 32

The determination of Output, Income, Expenditure and a model of Real

Equilibrium

The production function and aggregate supply
Demand for labour
MPL=W/P

Слайд 33

The determination of Output, Income, Expenditure and a model of Real

Equilibrium

The production function and aggregate supply
Demand for capital
MPK=F(K+1,L)-F(K,L)
MPK=R/P

Слайд 34

The determination of Output, Income, Expenditure and a model of Real

Equilibrium

The distribution of national income
The national income is used to pay labour and capital
Y=MPLxL+MPKxK

Слайд 35

The determination of Output, Income, Expenditure and a model of Real

Equilibrium

The distribution of national income
Y=Ka L (1-a)
MPL=(1-a)Y/L
MPK=aY/K

Слайд 36

The determination of Output, Income, Expenditure and a model of Real

Equilibrium

The distribution of national income
Y=Ka L (1-a)
MPL=(1-a)Y/L
MPK=aY/K

Слайд 37

The determination of Output, Income, Expenditure and a model of Real

Equilibrium

The distribution of national income
(1-a)=MPLxL/Y
a=MPKxK/Y

Слайд 38

The determination of Output, Income, Expenditure and a model of Real

Equilibrium

The expense of national income
Income=Expenditure
Y=C+I+G

Слайд 39

The determination of Output, Income, Expenditure and a model of Real

Equilibrium
The expense of national income
The consumption function
Classical economists consider that savings is determined by the rate of interest.

Слайд 40

The determination of Output, Income, Expenditure and a model of Real

Equilibrium
The expense of national income
The consumption function
Keynesian economists consider that most influent variable for consumption is level of income. (Psychological fundamental law).

Слайд 41

The determination of Output, Income, Expenditure and a model of Real

Equilibrium
The expense of national income
The consumption function
In keynesian economics
MPC=∆C/ ∆(Y-T) marginal propensity to consume

Слайд 42

The determination of Output, Income, Expenditure and a model of Real

Equilibrium
The expense of national income
The consumption function
C=C0 + c (Y-T) 0APC=C/(Y-T) = C0 /(Y-T)+c
APC is decreasing with higher Y

Слайд 43

The determination of Output, Income, Expenditure and a model of Real

Equilibrium

The expense of national income
The investment function
The decision to invest at the micro level
The decision rule
For a given project the investment will be achieved only if r>r*

Слайд 44

The determination of Output, Income, Expenditure and a model of Real

Equilibrium

The expense of national income
The investment function
The decision to invest at the macro level
Selection of investment projects with
r>r*

Слайд 45

The determination of Output, Income, Expenditure and a model of Real

Equilibrium

The expense of national income
Public spending
- operating expenses
- capital expenses
- expenditure of social security
- debt service

Слайд 46

The determination of Output, Income, Expenditure and a model of Real

Equilibrium

The expense of national income
Public spending
The government must fund these expenses. Expenditures must be offset by equivalent receipts obtained
- by taxes
- borrowing through net issuance of debt
securities
- printing money

Слайд 47

The determination of Output, Income, Expenditure and a model of Real

Equilibrium

The equilibrium in the market for goods and services
Y=E (Expenditure)
Y=C+I+G
C (Y-T) +I (r) +G Y, T , G are exogenous
Y=C(Y-T)+ I(r)+G
Y=F(K,L)

Слайд 48

The determination of Output, Income, Expenditure and a model of Real

Equilibrium

The equilibrium in the financial market: the role of the interest rate
A) Savings
S=Y-C-G
S=(Y-T-G) +(T-G)
(Y-T-C)- private savings
(T-G) –public savings

Слайд 49

The determination of Output, Income, Expenditure and a model of Real

Equilibrium

The equilibrium in the financial market: the role of the interest rate
B) Investment
Investment is the demand for loanable funds and negatively linked with the interest rate
C) The market for loanable funds
S=I (r)
Y=C+I (r)+G
Y-C-G=I (r)
S=I (r)

Слайд 50

The determination of Output, Income, Expenditure and a model of Real

Equilibrium

The impact of budget policy on saving and investment
A) The effect of higher public spending
Y=C+ I (r)+G
B) The effect of tax cut

Слайд 51

Money, prices and interest rates
What is the impact of change in

the quantity of money on the functioning of economy
What connection is there between the interest rate, demand for money and price trends
What problems between too large fluctuations in the price level.

Слайд 52

Money, prices and interest rates
Money is one of the asset which

is the easiest to mobilize to carry out transactions (very liquid asset).
3 Functions of money
Money is a store of value.
Money is a unit of account, a measurement standard.
Money is an instrument of payment

Слайд 53

Money, prices and interest rates
Agents will want to have a greater

or lesser amount of these asset as needed. So there is a demand for money, as well as for any good or asset.
The money supply is controlled the banking system, consisting of regular banks under the authority of central bank.

Слайд 54

Money, prices and interest rates
The Quantity theory of money
MV=PY
V=PY/M

=nominal GDP/Money stock

Слайд 55

Money, prices and interest rates
The Quantity theory of money
Demand for

money
Md=(1/V)PY 1/V=k
Md =kY
QTM is the theory of determining the price level by the quantity of money.

Слайд 56

Money, prices and interest Rates
The Interest Rate, the demand for money

and Inflation
The nominal interest rate (NIR) is the rate of change of an amount of money during a period when the is the subject of a loan.
The real interest rate (RIR) is the rate of variation in the purchasing power of money.

Слайд 57

Money, prices and interest Rates
The Interest Rate, the demand for money

and Inflation
NIR and RIR are connected הּ-Inflation rate
(1+i)= (1+r)(1+ הּ)
1+i=1+r+ הּ+ הּr
i≈r+ הּ

Слайд 58

Money, prices and interest Rates
The Interest Rate, the demand for money

and Inflation
NIR depends on:
-the real interest rate, itself determined between savings and investment
- expected inflation
i=r+הּe

Слайд 59

Money, prices and interest Rates
Interest rate and money demand
Md/P =

L(i,Y)
Demand for real money balances depends on nominal interest rate and on real GDP

Слайд 60

Money, prices and interest Rates
The money supply and expected price level
M/P

=Md/P
M/P=L (i, Y)

Слайд 61

Money, prices and interest rates
The money supply and expected price level
M/P=L

(r+ הּe, Y )
P=M/L(r+ הּe, Y )

Слайд 62

Money, prices and interest rates
The Problems with Too Large Fluctuation in

Price Level
Inflation is a general rise in prices of goods and services.
Its effects on money functions
Inflation creates many distortions

Слайд 63

Money, prices and interest rates
The Problems with Too Large Fluctuation in

Price Level
Deflation is the symmetrical situation of inflation.

Слайд 64

Labour market, employment, unemployment
Labour demand comes from com-panies that want to

produce.
Labour supply comes from indi-viduals who wish to earn an income.

Слайд 65

Labour market, employment, unemployment
The labour force is an aggregate that includes

the employed labour force (ELF) and the population that is seeking a job (Unemployed Labour Force; ULF).
The participation rate is defined as follows:
a =(ELF+ULF)/15-64 years population

Слайд 66

Labour market, employment, unemployment
The labour force is an aggregate that includes

the employed labour force (ELF) and the population that is seeking a job (Unemployed Labour Force; ULF).
u (unemployment rate)
ULF/ELF+ULF

Слайд 67

Labour market, employment, unemployment
The labour force is an aggregate that includes

the employed labour force (ELF) and the population that is seeking a job (Unemployed Labour Force; ULF).
e (Employment rate)
ELF/15-64 years population

Слайд 68

Labour market, employment, unemployment
N=E+U+I N=15-64 years old
a= (E+U)/N
e=E/N
u=U/(E+U)
a=e/(1-u)

Слайд 69

Labour market, employment, unemployment
Share of long length unemployed (those unemployed for

one year and more) in the total unemployed.
Average duration of unemployment

Слайд 70

Labour market, employment, unemployment
The flow of workers
It is the number of

people who, over time, get in and out of employment status.
Flow of jobs
Net job flow=flow of job creation- flow of job destruction

Слайд 71

The Long-Run Rate of Unemployment
L =E+U
u=U/L
Job acquisition rate a=A/U

percentage of unemployed during a given month who gains employment

Слайд 72

The Long-Run Rate of Unemployment
L =E+U
u=U/L
Job loss rate p=P/U

percentage of employees who lose their jobs in a given month.

Слайд 73

The Long-Run Rate of Unemployment
Natural rate of unemployment=long-run rate of unemployment
A=P

Слайд 74

Economic fluctuations
The economy is experiencing fluctuations that result in variations in

the level of output around its long-run trend. The existence of these fluctuations leads to talk about business cycle.

Слайд 75

Economic fluctuations
Acceleration phases (economic boom)
Contraction phase (economic recession)

Слайд 76

Economic fluctuations
Changes in output and unemployment
When the economy is bad,

cyclical unemployment, adds to structural and frictional unemployment.
The relationship between output level and unemployment is known as “Okun,s law”

Слайд 77

Economic fluctuations
Changes in output and unemployment
When the economy is bad,

cyclical unemployment, adds to structural and frictional unemployment.
Okun consider that: the unemployment rate is negatively linked to the level of output.

Слайд 78

Economic fluctuations
Changes in output and unemployment
When the economy is bad,

cyclical unemployment, adds to structural and frictional unemployment.
ut=a-β((Yt-Y*)/Y*)
ut –u*= - β((Yt-Y*)/ Y*)
The unemployment gap is negatively linked to the output gap expressed in percent”.

Слайд 79

Economic fluctuations
Aggregate demand and aggregate supply
The aggregate demand is deduced

from the quantity aquation of money.
The AD curve is the curve reflecting, at the macroeconomic level, the relationship between the demanded quontities of goods and price level (for a given level of money supply and velocity).

Слайд 80

Economic fluctuations
Aggregate demand and aggregate supply
The aggregate supply
The long-run aggregate

supply (LRAS)
Production function Y=f (K,L)
The short-run aggregate supply (SRAS)
Rigidity of prices

Слайд 81

Economic fluctuations
Aggregate demand and aggregate supply
AS-AD model
Long-run effect of change

in AD
In the long run only the price level is effected.

Слайд 82

Economic fluctuations
Aggregate demand and aggregate supply
AS-AD model
Short-run effect of change

in AD
In the short run, an AD decrease reduces the activity level of the economy which can fall in a recession. Prices are pushed down. An increase pushes output up and prices too.

Слайд 83

Economic fluctuations
Aggregate demand and aggregate supply
AS-AD model
The Effect of Monetary

Policy
The Central bank can reduce the money supply
The M decrease reduces AD, which affects the level of output Y and the economy enters a recession.
Over time, given the weak demand, prices will decrease. The prices decrease brings the economy towards its long-run equilibrium.

Слайд 84

Economic fluctuations
Aggregate demand and aggregate supply
AS-AD model
The Effect of Monetary

Policy
1) a decrease in output in the short run, then a return to the long-run value
2) price stability in the short run and lower prices over time

Слайд 85

Economic fluctuations
Aggregate demand and aggregate supply
AS-AD model
The Effect of Monetary

Policy
1) a decrease in output in the short run, then a return to the long-run value
2) price stability in the short run and lower prices over time

Слайд 86

Economic fluctuations
Aggregate demand and aggregate supply
AS-AD model
The Effect of Monetary

Policy
1) a decrease in output in the short run, then a return to the long-run value
2) price stability in the short run and lower prices over time

Слайд 87

Economic fluctuations
External shock –an event that affects suddenly the economy and

rules out output of his equilibrium level.
Demand shocks affect the main components of demand: con-sumption, investment, exports.
Supply shocks cause changes in production costs for firms.

Слайд 88

The Keynesian Model of Short-Run Equilibrium
Model IS-LM
Keynesian Macroeconomics (KM)
-

prices are sticky in the short run
- the short run equilibrium does not necessarily correspond to full employment and the level of employment is determined by the level of aggregate demand
- the quantity of money has an impact on the level of real output

Слайд 89

The Keynesian Model of Short-Run Equilibrium
Model IS-LM
Keynesian Macroeconomics (KM)

C=c(Y-T)
E=c (Y-T)+I+G
E=cY+(I+G-cT)
Keynesian equilibrium
Real Output=Planned Expenditure

Слайд 90

The Keynesian Model of Short-Run Equilibrium
Model IS-LM
The impact of budget

policy
∆Y=(1/1-c)/ ∆G
∆ Y=(-c/(1-c)) x ∆T

Слайд 91

The Keynesian Model of Short-Run Equilibrium
Model IS-LM
The impact of budget

policy
Balanced budget
∆Y= ∆G ∆

Слайд 92

The Keynesian Model of Short-Run Equilibrium
Model IS-LM
I =I(r)
IS curve

shows all possible com-binations of income and interest rate that are consistent with equilibrium in the market for goods and services.

Слайд 93

The Keynesian Model of Short-Run Equilibrium
Model IS-LM
Budget policy and IS-curve

- An increase in public spending or a decrease in taxes moves IS to the right
- Lower public spending or higher taxes moves IS to the left.

Слайд 94

The Keynesian Model of Short-Run Equilibrium
Model IS-LM
Money market and LM

Curve
The money supply
-the money supply is exogenous and depends on the central bank;
-prices are fixed in the short run

Слайд 95

The Keynesian Model of Short-Run Equilibrium
Model IS-LM
Money market and LM

Curve
The demand for money
Md/P=L(i,Y)
- transaction motive
- a care motive
- speculative motive

Слайд 96

The Keynesian Model of Short-Run Equilibrium
Model IS-LM
Definition: the LM curve

represents all possible combinations of interest rate and income levels that meet the equilibrium of money market.

Слайд 97

The Keynesian Model of Short-Run Equilibrium
Model IS-LM
Short-Run Equilibrium
Y=C(Y-T)+I(r)+G
M/P=L(i,Y)

Слайд 98

The Keynesian Model of Short-Run Equilibrium
Model IS-LM
Economic Policy through the

IS-LM model.
The stabilization of the economy through budget policy
-The case of a rise in public spending
-The case of tax-cut

Слайд 99

The Keynesian Model of Short-Run Equilibrium
Model IS-LM
Economic Policy through the

IS-LM model.
The stabilization of activity by monetary policy
The interaction of budget and monetary policies

Слайд 100

The Keynesian Model of Short-Run Equilibrium
Model IS-LM
IS-LM and aggregate demand
IS-LM

and deflation

Слайд 101

Aggregate Supply
LRAS –level of output is determined only by amounts of

factors available.
SRAS is based on the assumption of sticky prices in the short run
(Y-Y*)=a(P-Pe)

Слайд 102

Macroeconomics. Introduction

Содержание

IntroductionStructure of courseChapter 1 The date and methods of macroeconomics Chapter

IntroductionStructure of courseChapter 5 The Determination of Output, Income, Expenditure and

IntroductionStructure of courseChapter 7 Labour Market, Employment, Unemployment Chapter 8 Economic

IntroductionStructure of courseChapter 9 The Keynsian Model of Short-Run Equilibrium

IntroductionDefinition “Macroeconomics was born as distinct in the 1940, as part

IntroductionDefinition Since then, economic science is divided into two fields

IntroductionDefinition Since then, economic science is divided into two fields

Introduction Relationships between two sub- disciplines Examples - how

Introduction An overview of the macroeconomic theories Two main theories: -

IntroductionAn overview of the macroeconomic theoriesClassical theory- economic policies are not

IntroductionAn overview of the macroeconomic theoriesKeynesian theory – economic policies are

IntroductionAn overview of the macroeconomic theoriesClassical theory-Hypothesis of flexible prices, macroeconomic

IntroductionAn overview of the macroeconomic theoriesKeynsian theory helps to explain the

IntroductionThe Empirical Aspects of the Macro-economicsThe macro circuit means a non-theoretical

IntroductionThe Empirical Aspects of the Macro-economicsThe output is the value, expressed

IntroductionThe Empirical Aspects of the Macro-economicsExpenditure means the money value of

IntroductionThe Empirical Aspects of the Macro-economicsMacroeconomic subjects

IntroductionThe Empirical Aspects of the Macro-economicsOUTPUT=INCOME=EXPENDITURE

IntroductionThe measurement of macroeconomic factsEconomic variables -Stock variables measure a quantity

IntroductionThe measurement of macroeconomic factsMeasurement of outputThe nominal output QV

IntroductionThe measurement of macroeconomic factsMeasurement of outputThe real outputQVOLt = ∑qit

IntroductionThe measurement of macroeconomic factsMeasurement the changesMeasurement of price changes I

IntroductionThe measurement of macroeconomic factsMeasurement the productivityY/H hourly labour productivity

Introduction Methods and Assumptions of Macro-economic What is a model?

Introduction Methods and Assumptions of Macro-economic What is a model?

The determination of Output, Income, Expenditure and a model of Real

The determination of Output, Income, Expenditure and a model of Real

The determination of Output, Income, Expenditure and a model of Real

The determination of Output, Income, Expenditure and a model of Real

The determination of Output, Income, Expenditure and a model of Real

The determination of Output, Income, Expenditure and a model of Real

The determination of Output, Income, Expenditure and a model of Real

The determination of Output, Income, Expenditure and a model of Real

The determination of Output, Income, Expenditure and a model of Real

The determination of Output, Income, Expenditure and a model of Real

The determination of Output, Income, Expenditure and a model of Real

The determination of Output, Income, Expenditure and a model of Real

The determination of Output, Income, Expenditure and a model of Real

The determination of Output, Income, Expenditure and a model of Real

The determination of Output, Income, Expenditure and a model of Real

The determination of Output, Income, Expenditure and a model of Real

The determination of Output, Income, Expenditure and a model of Real

The determination of Output, Income, Expenditure and a model of Real

The determination of Output, Income, Expenditure and a model of Real

The determination of Output, Income, Expenditure and a model of Real

The determination of Output, Income, Expenditure and a model of Real

The determination of Output, Income, Expenditure and a model of Real

The determination of Output, Income, Expenditure and a model of Real

The determination of Output, Income, Expenditure and a model of Real

Money, prices and interest ratesWhat is the impact of change in

Money, prices and interest ratesMoney is one of the asset which

Money, prices and interest ratesAgents will want to have a greater

Money, prices and interest ratesThe Quantity theory of money MV=PY V=PY/M

Money, prices and interest ratesThe Quantity theory of money Demand for

Money, prices and interest RatesThe Interest Rate, the demand for money

Money, prices and interest RatesThe Interest Rate, the demand for money

Money, prices and interest RatesThe Interest Rate, the demand for money

Money, prices and interest RatesInterest rate and money demand Md/P =

Money, prices and interest RatesThe money supply and expected price levelM/P

Money, prices and interest ratesThe money supply and expected price levelM/P=L

Money, prices and interest ratesThe Problems with Too Large Fluctuation in

Money, prices and interest ratesThe Problems with Too Large Fluctuation in

Labour market, employment, unemploymentLabour demand comes from com-panies that want to

Labour market, employment, unemploymentThe labour force is an aggregate that includes

Labour market, employment, unemploymentThe labour force is an aggregate that includes

Labour market, employment, unemploymentThe labour force is an aggregate that includes

Labour market, employment, unemploymentN=E+U+I N=15-64 years olda= (E+U)/Ne=E/Nu=U/(E+U)a=e/(1-u)

Labour market, employment, unemploymentShare of long length unemployed (those unemployed for

Labour market, employment, unemploymentThe flow of workersIt is the number of

The Long-Run Rate of Unemployment L =E+Uu=U/L Job acquisition rate a=A/U

The Long-Run Rate of Unemployment L =E+Uu=U/L Job loss rate p=P/U

The Long-Run Rate of UnemploymentNatural rate of unemployment=long-run rate of unemploymentA=P

Economic fluctuations The economy is experiencing fluctuations that result in variations in

Economic fluctuations Acceleration phases (economic boom)Contraction phase (economic recession)

Introduction
Structure of course
Chapter 1 The date and methods of macroeconomics
Chapter

Introduction
Structure of course
Chapter 5 The Determination of Output, Income, Expenditure and

Introduction
Structure of course
Chapter 7 Labour Market, Employment, Unemployment
Chapter 8 Economic

Introduction
Structure of course
Chapter 9 The Keynsian Model of
Short-Run Equilibrium

Introduction
Definition
“Macroeconomics was born as distinct in the 1940, as part

Introduction
Definition
Since then, economic science is divided into two fields

Introduction
Definition
Since then, economic science is divided into two fields

Introduction
Relationships between two sub-
disciplines
Examples
- how

Introduction
An overview of the macroeconomic theories
Two main theories:
-

Introduction
An overview of the macroeconomic theories
Classical theory- economic policies are not

Introduction
An overview of the macroeconomic theories
Keynesian theory – economic policies are

Introduction
An overview of the macroeconomic theories
Classical theory-
Hypothesis of flexible prices, macroeconomic

Introduction
An overview of the macroeconomic theories
Keynsian theory helps to explain the

Introduction
The Empirical Aspects of the Macro-economics
The macro circuit means a non-theoretical

Introduction
The Empirical Aspects of the Macro-economics
The output is the value, expressed

Introduction
The Empirical Aspects of the Macro-economics
Expenditure means the money value of

Introduction
The Empirical Aspects of the Macro-economics
Macroeconomic subjects

Introduction
The Empirical Aspects of the Macro-economics
OUTPUT=INCOME=EXPENDITURE

Introduction
The measurement of macroeconomic facts
Economic variables
-Stock variables measure a quantity

Introduction
The measurement of macroeconomic facts
Measurement of output
The nominal output
QV

Introduction
The measurement of macroeconomic facts
Measurement of output
The real output
QVOLt = ∑qit

Introduction
The measurement of macroeconomic facts
Measurement the changes
Measurement of price changes
I

Introduction
The measurement of macroeconomic facts
Measurement the productivity
Y/H hourly labour productivity

Introduction
Methods and Assumptions of Macro-economic
What is a model?

Introduction
Methods and Assumptions of Macro-economic
What is a model?

Money, prices and interest rates
What is the impact of change in

Money, prices and interest rates
Money is one of the asset which

Money, prices and interest rates
Agents will want to have a greater

Money, prices and interest rates
The Quantity theory of money
MV=PY
V=PY/M

Money, prices and interest rates
The Quantity theory of money
Demand for

Money, prices and interest Rates
The Interest Rate, the demand for money

Money, prices and interest Rates
The Interest Rate, the demand for money

Money, prices and interest Rates
The Interest Rate, the demand for money

Money, prices and interest Rates
Interest rate and money demand
Md/P =

Money, prices and interest Rates
The money supply and expected price level
M/P

Money, prices and interest rates
The money supply and expected price level
M/P=L

Money, prices and interest rates
The Problems with Too Large Fluctuation in

Money, prices and interest rates
The Problems with Too Large Fluctuation in

Labour market, employment, unemployment
Labour demand comes from com-panies that want to

Labour market, employment, unemployment
The labour force is an aggregate that includes

Labour market, employment, unemployment
The labour force is an aggregate that includes

Labour market, employment, unemployment
The labour force is an aggregate that includes

Labour market, employment, unemployment
N=E+U+I N=15-64 years old
a= (E+U)/N
e=E/N
u=U/(E+U)
a=e/(1-u)

Labour market, employment, unemployment
Share of long length unemployed (those unemployed for

Labour market, employment, unemployment
The flow of workers
It is the number of

The Long-Run Rate of Unemployment
L =E+U
u=U/L
Job acquisition rate a=A/U

The Long-Run Rate of Unemployment
L =E+U
u=U/L
Job loss rate p=P/U

The Long-Run Rate of Unemployment
Natural rate of unemployment=long-run rate of unemployment
A=P

Economic fluctuations
The economy is experiencing fluctuations that result in variations in

Economic fluctuations
Acceleration phases (economic boom)
Contraction phase (economic recession)