1. Macroeconomics
Lecture 12
Revision

2. Topic 1: Measuring a nation’s income
GDP: definition and measurement
GDP growth rate
Nominal vs. real GDP
GDP deflator
Is GDP a perfect measure of eco. Well- being?

3. Topic 2: Production and growth
Macroeconomics
Lecture 5
Topic 2: Production and growth
Productivity is a determinant of a country’s standard of living
Determinants of productivity
Growth rate of productivity
The rule of 70
The catch up effect
How public policies influence eco. Growth?

4. Topic 3: Unemployment Definition Different types of unemployment
Macroeconomics
Lecture 5
Topic 3: Unemployment
Definition
Different types of unemployment
How to measure it?
Policies and unemployment (minimum wage, efficiency wage, unemployment insurance, union collective bargaining, etc.)
The loss of income is devastating for those who bear it. Employment benefits create a safety net but don’t fully replace lost wages, and not everyone receives benefits.
Prolonged unemployment permanently damages a person’s job prospects by destroying human capital.

5. Topic 4: Saving, Investment and the financial system
Bonds vs. stocks
The financial system
Saving equation
Market for loanable fund
Government policies and their impact on the market for loanable fund

6. Topic 5: The monetary system
Money function and measurement
Central bank: functions and tools
Money creation and the money multiplier

7. Topic 6: Money growth and inflation
Inflation: definition and measurement
CPI vs. GDP deflator
Classical theory of inflation and quantity theory of money
Fisher effect
Costs of inflation

8. Topic 7: AD, AS and the Phillips curve
Economic fluctuation
AD: why it slopes downward? Determinants?
AS short run vs. AS long run
AS: determinants?
Short run equilibrium vs. long run equil.
How does the economy adjust back to long run equilibrium after a AD or AS shock?
Phillips curve short run vs. long run

9. Topic 8: Monetary and fiscal policy
The unemployment rate
U/E rate = Unemployed / Labour force
The labor-force participation rate (LFPR)
LFPR = Labour force / Adult population

10. Topic 8: Monetary and fiscal policy
(a) The Money Market
(b) The Aggregate-Demand Curve
Interest Rate
Money supply, MS1
1. When the CB increases the money supply…
MS2
Price Level Y2
AD2
3. …which increases the quantity of goods and services demanded at a given price level. P r1 r2
2. …the equilibrium interest rate falls…
Aggregate demand, AD1
Quantity
of Money Y1
Quantity
of Output

11. Fiscal policy: Multiplier vs. crowding out effect
(a) The Money Market
(b) The Shift in Aggregate Demand
Interest Rate
AD3
4. …which in turn partly offsets the initial increase in aggregate demand.
Price Level
1. When an increase in government purchases increases aggregate demand…
AD2
$20 billion
Money supply
MD2
2. …the increase in spending increases money demand…
3. …which increases the equilibrium interest rate… r2 r1
Money demand, MD1
Aggregate demand, AD1
Quantity of Money
Quantity fixed by the Fed
Quantity of Output

12. Topic 9: International trade
Macroeconomics
Lecture 5
Topic 9: International trade
Absolute advantage
Comparative advantage
Term of trade
Gains from trade
Trade policies: Tariff and quota
Labour Force = 54.3
Adult population: 69.7
Unemployment rate: 1.93
Labour force participation rate: 77.9

13. Figure 6 The Effects of a Tariff
Price
of Steel A
Domestic
demand
Domestic
supply
Deadweight Loss B
Price
with tariff C G D F Q S E Q D
Tariff
Price
without tariff
World Q S Q D
Imports
with tariff
price
Quantity
Imports
without tariff
of Steel
Copyright © South-Western

14. Topic 10: Open-economy Macroeconomics
Net export: factors that affect NX
NCO: Factors that affect NCO
The relationship between NX and NCO
Saving and investment in a open economy
Real vs. nominal exchange rate and impact on NX

15. FINAL EXAM 40 MCQs: 40 marks Cover all topics
2 short answers: Topic 1-6 (20 marks)
2 problems/long answers: Topic 7-9 (40 marks)