chapter 1. introduction link to syllabussyllabus
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Chapter 1. Introduction
Link to syllabus
First Class
Link to Syllabus
Roll, Adds and DropsExams, homeworkMacromodel Programs
Link to mt’s webpage
Goals of the courseMajor ThemesComments about textbook
Econ 301 as center of the worldBasic dataEpilogue to Mankiw’s text.
Goals of the course
• Understand Macroeconomic phenomena – inflation, unemployment, exchange rates
• Policy issues: Government spending and taxes, the deficit/debt. Social Security doesn’t get much play in this textbook.
• Practice using models and graphs to study interactions of many variables
• This course is a useful pre-req for grad school/MBA programs
• Comments about textbook
Major Themes
• Classical Model – full employment• ‘Keynesian’ models – not necessarily full
employment• Analyzed in terms of Aggregate Demand and
Aggregate Supply. AD depends on IS-LM, which is a major building block. (also, IS*-LM*)
• Aggregate Supply is not emphasized much.• Phillips curve is included, but not central• Short run/long run distinction. • Does more international than many other texts
Intellectual scheme for Econ 301.
MacroEcon 301
LaborEcon 321
Money &BankingEcon 311
International Finance
Econ 347
Public Finance
Econ 481
Industrial OrganizationEcon 331/333
Microeconomics-Econ 302—is always in the background
Figure 1-1 p. 5. Real GDP per person in the US.
Figure 1-2 p. 6. Inflation in the U.S.
Figure 1-3 p. 7. Unemployment in U.S.
Unemployment Rate, US
Source: US Dept. of Labor http://data.bls.gov/timeseries/LNS14000000
Inflation in the U.S.
Source: Bureau of Labor Statistics:http://data.bls.gov/pdq/SurveyOutputServlet?request_action=wh&graph_name=CU_cpibrief
Epilogue to Mankiw text
Four most important lessons of macroeconomics. 1. In the long run, a country’s capacity to produce goods and services determines the standard of living of its citizens. 2. In the short run, aggregate demand influences the amount of goods that a country produces 3. In the long run, the rate of money growth determines the rate of inflation, but does not affect the rate of unemployment 4. In the short run, policymakers who control monetary and fiscal policy face a tradeoff between inflation and unemployment
The four most important unresolved questions in macro
1. How should policymakers try to raise the economy’s natural rate of output? 2. Should policymakers try to stabilize the economy? 3. How costly is inflation, and how costly is reducing inflation? 4. How big a problem is government debt?
Note that the US currently suffers a recession, a large short term deficit, and the prospect of high long term debts.
Figure 1-4. P. 8. How Models Work
Figure 1-5. P. 9 Supply and Demand for Pizza
Figure 1-6. P. 10. Changes in
Equilibrium