1. What is Macroeconomics

rustycortegeΔιαχείριση

28 Οκτ 2013 (πριν από 3 χρόνια και 9 μήνες)

234 εμφανίσεις

1
Intermediate Macroeconomics
Chapter 1
An Overview of Macroeconomics
Intermediate Macroeconomics
An Overview of Macroeconomics
1.What is Macroeconomics
2.Macroeconomic Goals
3.Economic Theory in Practice
Intermediate Macroeconomics
1. What Is Macroeconomics?
• Microeconomics -
study of behavior of
individual economic agents.
• Macroeconomics -
study of aggregate
measures of the economy
Intermediate Macroeconomics
2. Macroeconomic Goals
• Low Unemployment
• Price Stability
• Economic Growth
• Complementary and Conflicting Goals
Intermediate Macroeconomics
2. Macroeconomic Goals
Low Unemployment
0%
5%
10%
15%
20%
25%
1930 1940 1950 1960 1970 1980 1990 2000
Average annual unemployment rate, %
U.S.
Fairfax Co., VA.
1973 - 1975
recession
1981 - 1982
recession
1990 - 1991
recession
Great Depression
(1929 - 1933)
World War II
(1941 - 1945)
Source: Bureau of Labor Statistics (www.bls.gov)
Intermediate Macroeconomics
2. Macroeconomic Goals
Price Stability
Average Annual U.S.Inflation Rate
Consumer Price Index
-15%
-10%
-5%
0%
5%
10%
15%
20%
1913 1923 1933 1943 1953 1963 1973 1983 1993 200
3
Annual Change, percen
t
Great Depression
1929 - 1933
World War 1
1917 - 1918
World War 2
1941 - 1945
Arab oil
Embargo
1973 - 1974
Iranian
Revolution
and Oil Price
Increase
Source: Bureau of Labor Statistics (www.bls.gov)
2
Intermediate Macroeconomics
2. Macroeconomic Goals
Economic Growth
-0.3
-0.2
-0.1
0
0.1
0.2
0.3
1930 1940 1950 1960 1970 1980 1990 2000
Percent annual change
Source: Bureau of Economic Analysis (www.bea.gov)
Nominal GDP
Real GDP (chained 1996 dollars)
Annual change in U.S. GDP per capita
Intermediate Macroeconomics
2. Macroeconomic Goals
Economic Growth
$0
$10,000
$20,000
$30,000
$40,000
1930 1940 1950 1960 1970 1980 1990 2000
Real GDP per capita
chained (1996) dollars
Long term trend 2.4% per year
Intermediate Macroeconomics
2. Macroeconomic Goals
Complementary and Conflicting Goals
• Complementary Goals
– Low unemployment and high economic
growth
• Conflicting Goals
– Low unemployment and low inflation
Intermediate Macroeconomics
3. Economic Theory in Practice
• Economic Theory and Models
• Empirical Applications
Intermediate Macroeconomics
3. Economic Theory in Practice
Economic theory and models
What makes a good model?
• Accurately explains history
• Makes reasonable predictions
about the future
Intermediate Macroeconomics
3. Economic Theory in Practice
Economic theory and models
Keep models simple
• Occam’s Razor -
eliminate
complicating details that don’t
significantly contribute to the model
• Ceteris Paribus -
other things being
equal
3
Intermediate Macroeconomics
3.Economic Theory in Practice
Empirical time series applications
• Use Real rather than Nominal values
• Compare Per Capita rather than
Totals
• Compare Growth Rates rather than
Levels
Intermediate Macroeconomics
3. Economic Theory in Practice
Compare real rather than nominal
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
1929 1939 1949 1959 1969 1979 1989 1999
Chained 2000 dollars
Real GDP Nominal GDP
Source: Bureau of Economic Analysis, www.bea.gov
Percent increase 1929 – 2003
Nominal GDP:10,522 %
Real GDP:1,100 %
Intermediate Macroeconomics
3. Economic Theory in Practice
Compare per capita rather than aggregates
$0
$10,000
$20,000
$30,000
$40,000
1929 1939 1949 1959 1969 1979 1989 1999
Per capita chained 2000 dollar
s
$0
$10,000
$20,000
$30,000
$40,000
billions of chained 2000 dollar
s
Total Real
GDP
Real GDP
per capita
Source: Bureau of Economic Analysis, www.bea.gov
Percent increase 1929 – 2003
Total Real GDP: 1,100 %
Real GDP per capita:402%
Intermediate Macroeconomics
3. Economic Theory in Practice
Compare growth rates rather than levels
2.0%
4.1%
1.7%
2.9%
2.1%
2.3%
2.0%
0%
1%
2%
3%
4%
5%
Annual growth real GD
P
per capita
1930-
1940
1940-
1950
1950-
1960
1960-
1970
1970-
1980
1980-
1990
1990-
2000
Source: Bureau of Economic Analysis, www.bea.gov