Macroeconomics

Chapter One Introduction Macroeconomics : 1. Definition - macroeconomics is concerned with the behavior of the economy as a whole-----booms and recessions, peaks and troughs; GDP; the rate of growth, inflation, unemployment; BOP; Exchange Rate ……

Some Key Concepts 2. Research method: Aggregate ---- Goods, Labor, Assets markets, International Finance and Trade ---- and Interactions among them ---- and Interactions among them GDP(Gross domestic product) ---is the value of all final goods and services produced in the economy in a given period of time GDP(Gross domestic product) ---is the value of all final goods and services produced in the economy in a 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 2. GDP Versus GDP per capita base year price 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 production the use of the factors of production

Consumption Consumption Investment Investment Money Supply Money Supply Fiscal Surplus and Deficit Fiscal Surplus and Deficit Unemployment Rate Unemployment Rate Exchange Rates Exchange Rates

Three central issues in the research agenda: Three central issues in the research agenda: 1. How do we explain periods of high and 1. How do we explain periods of high and persistent unemployment? 2. How do we explain inflation? 3. What determines economic growth? persistent unemployment? 2. How do we explain inflation? 3. What determines economic growth? Relationships Among Macroeconomic Variables Relationships Among Macroeconomic Variables

1. Growth and Unemployment Okun`s Law : △ U = (y ) 2. Inflation and Business Cycle 3. Inflation and Unemployment Tradeoffs: Phillips Curve : 1. Growth and Unemployment Okun`s Law : △ U = (y ) 2. Inflation and Business Cycle 3. Inflation and Unemployment Tradeoffs: Phillips Curve :

Macroeconomic Theory System 1. Framework (insert Figure) 2. Three main analytical tools Macroeconomic Theory System 1. Framework (insert Figure) 2. Three main analytical tools Keynesian Model Keynesian Model IS-LM Model IS-LM Model AD-AS Model AD-AS Model Fleming-Mundell Model Fleming-Mundell Model

3. Some Topics Consumption theory Consumption theory Investment Theory Investment Theory Multiplier Multiplier Supply and Demand of Money Supply and Demand of Money Basic concepts of international economics Basic concepts of international economics Unemployment Unemployment Inflation Inflation Economic Growth Economic Growth

Macroeconomic Policy 1. Aims of Policy Full employment ; stability of price; economic growth ; balance of payments 2.Contradictions Among different aims 3.Policy tools Macroeconomic Policy 1. Aims of Policy Full employment ; stability of price; economic growth ; balance of payments 2.Contradictions Among different aims 3.Policy tools Fiscal polices ; Monetary polices Fiscal polices ; Monetary polices