Introduction to Macroeconomics

Gavin Cameron University of Oxford

OUBEP 2006

OXFORD UNIVERSITY BUSINESS ECONOMICS PROGRAMME

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introduction• “Macroeconomics? Is that the

one about the big things?”

• Macro helps you to:

Read the FTUnderstand Ben BernankeThink about ChinaUnderstand your business

environmentAvoid country crises!

OXFORD UNIVERSITY BUSINESS ECONOMICS PROGRAMME

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five days of macro…• Sunday (Introduction and the Long

Run)• Around the World in 60 Minutes• Economic Growth• Unemployment

• Monday (the Short Run)• Short-run macroeconomic

activity• Short-run policy implication• Unemployment and Inflation• Guest Speaker: Jon Temple on

Globalisation & Growth• Tuesday (the Medium Run)

• The Open Economy• Balance in the Open Economy• Modern Macroeconomic Practice• Guest Speaker: Linda Yueh on

China

• Wednesday (International Issues)• Free Trade• Trade Barriers• Oil• Guest Speaker: Nick

Crafts on the BRIC economies

• Thursday• The Macro Project Day

with OEF (green team to win!)

• Guest Tutor: Adrian Cooper

OXFORD UNIVERSITY BUSINESS ECONOMICS PROGRAMME

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syndicate modelling task• In the land of Courytania, E=C+I+G+X-M and C=cYD where YD is

disposable income (equal to Y at first).• Solving the model (E*=Y)

• What is equilibrium income when I=20, G=10, X=50, M=50 and c=0.9?

• What is the marginal propensity to consume? Plot a diagram relating E to Y.

• What happens to income if I=30? What is the multiplier?• Taxing the citizens

• What happens to equilibrium income if the government introduces a tax at rate t=0.1, so YD=Y-tY?

• Paying the moneylenders• What happens to equilibrium income if I=20-10r where r=0.1,

0.05 and 0 respectively? Plot a diagram relating r and Y.• Importing

• What happens to equilibrium income if M=20+0.1YD?