ECON 303Intermediate Macroeconomics
Instructor: Bernard Malamud–Office: BEH 502
Phone (702) 895 –3294Fax: 895 – 1354
»Email: [email protected]: www.unlv.edu/faculty/bmalamudOffice hours: MTWThF 11:30 am – 12:30 pm and by appointment
Course Objectives
Refresh your command of• Macroeconomic terminology
eco-talk• Macro Facts• Schools of thought
Course Objectives• Master MODELS
– Demand Side Models AD• Multiplier• IS – LM
– Supply Side Models AS• Wage setting – Price setting• Phillips Curve
– Role of Expectations … in theory and in practice– Stabilizing an Unstable Economy
• Understanding the current crisis• Revolution and evolution in macro-thought
– Solow Growth Model
Macro - variables• Output … Real GDP … Growth Rate• Unemployment• Inflation … CPI, GDP Deflator
Macro Time Frames• Short-run … sticky price• Medium-run … price adjusts• Long-run … economic growth
The State of Macro…a la KrugmanKeynes (1936): Y = C + I + G
– Economics of effective demandThe “Golden Age” (1946 ~ 1973): Fiscal dominanceMonetarist challenge: G crowded out/M-matters-most
– Friedman: Avoid monetary mischief“Freshwater” dominance: Rat-X/Efficient Markets
– Lucas: confusion recession– Prescott: supply shocks intertemporal substitution recession
“Saltwater” acquiescence: Rat-X with frictions– New Keynesian models/Monetarist policies
Housing bubble: end of the “Great Moderation”– Behavioral finance/return of Keynes?
Macro Facts: Recession! Recession Over?
Macro Facts: Recessions/Depression
Macro Facts: Unemployment
Macro Facts: Deflation!?!
Macro Facts: Federal Debt
Americans Do Debt
11
Household mortgages
Business debt
Consumer credit
FederalGov’t
Total DebtNon-Financial
Sectors
Macro Facts: Bank Excess Reserves
Macro Facts: Trade Deficit, Goods & Services
Imports
Exports
Major currencies/$
Broad basket of currencies/$
Average annual rates of growth, 1870-1998, world and main regions
1870 - 1998 1870 - 1913 1913 - 1950 1950 - 1973 1973-1998
World 1.48 1.30 0.91 2.93 1.33
Western Europe
1.74 1.32 0.76 4.08 1.78
Europe1
Western offshoots(b)
1.87 1.81 1.55 2.44 1.94
Japan 2.63 1.48 0.89 8.05 2.34
Asia (excluding Japan)
1.33 0.38 -0.02 2.92 3.54
Latin America 1.41 1.81 1.42 2.52 0.99Eastern Europe 1.22 1.15 1.50 3.49 -1.10
Africa0.88 0.64 1.02 2.07 0.01
Where to Find the Numbers• http://research.stlouisfed.org/fred2/• www.bls.gov/data/• www.economist.com• www.bea.doc.gov• http://www.gpoaccess.gov/eop/• www.oecd.org
MacroeconomicsThe course is divided in three parts: Short -run / Medium-run / Long-run
Short – run (sticky price): IS / LM ADIS: Y = C + I + G
C = c0 + c1 YD = c0 + c1 (Y - T) I = I0 + b1 Y - b2 i
Y = {spending multiplier} x {autonomous spending}
LM: (M/P)d = (M/P)s
(M/P)d = L(Y,i)Ms = [1/(c + r(1-c))]H= {money multiplier} x {monetary base}
Medium – run (flexible price): AD/ASIS/LM ADPS/WS AS
PS: P = (1+ μ)(W/A)WS: W= Pe Ae f(u,z)
In medium - run, Pe = P (W/P)WS = (W/P)PS = A / (1+ μ) Natural/Structural/Equilibrium Rate of Unemployment (un )“Full - employment” rate of output (YFE) The Green Shaft
SRAS and MRAS
When AD or AS shift: MR equilibrium SR equilibrium P new MR equilibrium
Long – run (factor supplies change): GrowthSteady state: s(Y/AN) = (δ + gN + gA )(K/AN)
For simple Cobb-Douglas function: Y = Kα (AN)1-α Y/AN = {s/((δ + gN + gA )}α/(1-α)
Golden - rule saving rate = α
Productivity and equilibrium rate of unemployment: Ae = A only in long - run “Natural rate” decreases with unexpected increase in A
Americans Do Debt
18
Household mortgages
Business debt
Consumer credit
FederalGov’t
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