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Chapter 1. Introduction
Link to syllabus
First Class
Roll, Adds and Drops
Exams, homework
Macromodel Programs
Link to Syllabus
Link to mt’s webpage
Goals of the course
Major Themes
Comments about textbook
Econ 301 as center of the world
Basic data
Epilogue 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.
Labor
Econ 321
Public
Finance
Econ 481
Industrial
Organization
Econ 331/333
Macro
Money &
Banking
Econ 311
Econ 301
International
Finance
Econ 347
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