Principles of Macroeconomics

Definition of macroeconomics:
,.
1(long-term)
2;(price)
3(unemployment)
4(inflation)
5(trade)
6(government policy)
(population, labor rate, saving, technology)

(business cycle: expansion, recession, recovery)

(unemployment)

trade among countries

Open market/no trade country

(deficit and surplus)
(macro policy)

(volume-expenditure, investment, productivity)

12

3
4

 (inflation and deflation)

price index change %

Classical and Keynesian market theory differences

 1
2 (
1.

2.
MV=PY)
V M PY
3. 1
(1)

(2)

(3)

(4)

4. 2 ---

2
(1)(2)(3)
(4)

5.
1970s 1980s 1980s

 1969 1970s
1980s 1990s
1948 - 1973 26

(1)(2)

(1)
(2)

1.

2.
3.

1.

2. ----

Demand and supply

(market)
()([perfectly] competitive market)
(price taker)

(quantity demanded)
(law of demand)
(demand curve)----

1.
(normal good)
(inferior good)
2.

(substitutes)
(complements)

(quantity supplied)
(law of supply)
(supply curve)

(equilibrium)(equilibrium
price)(market-clearing price)(equilibrium
price)
(surplus)(excess
supply)(shortage)(excess demand)

(law of supply and demand)

1.

2.
3.

GDP/GNP/Saving/Wealth

(expenditure, income, product)

1

==
1

GDP

123

4.GNP GDP

GDP GNP()
NFP

GDP=GNP-NFP

Y=GDP=C+I+G+NX
=+++

Government purchase

Export-import=net export

:
=Y+NFP+TR+INT-T
Y=GDP,NFP=,TR=,INT=,T=(tax
revenue)
=T-TR-INT
Saving and wealth

S =-=Y+NFP-T+TR+INT-C
S ==T-TR-INT-G
S=S +S =Y+NFP-C-G
=

S=(C+I+G+NX)+NFP-C-G=I+(NX+NFP)=I+CA
S =I+(-S )+CA

NX+NFP CA


S=I+CA.

GDP
GDP:

GDP =100* GDP/ GDP

Nominal and actual GDP

Interest rate

Capital stock

Y=AF(K,N)
A

1
2

123

:,;
( MPN)

()
3

12

Y=AF(K,N)
12
N

Unemployment

frictional unemployment

structural unemployment
natural
unemployment
cyclical unemployment

Y Y
2(u u )
Y /YY = 3

2 u

Consumption/saving/investment

S d = Y C d G

r a-t = (1 t ) i e

S d = Y C d G


MPK
uc

= rp K + dp K = ( r + d ) p K

MPK f = uc

(1 ) MPKf = uc

MPK f = uc /(1 ) = ( r + d ) p K/(1 )

K t+1 K t = I t dK t

12I t

= K* K t + dK t

123

 MPK

Y = Cd + Id + G
Sd = Y Cd G,
S d = I d

Open market policy

1
NX NFP CA

CA = NX + NFP + NUT

 KFA

CA + KFA = 0

S = I + CA = I + (NX + NFP)
NFP = 0 = NUT
S = I + CA = I + NX
Sd = Id + NX
Y = Cd + Id + G + NX
NX = Y (Cd + Id + G)
(Cd + Id + G)

1
2 MPKf

Long term economic growth

1
Y = AF(K, N)
dY/Y = dA/A + aK dK/K + aN dN/N

aK aN

aK dK/K

 aN dN/N
2
n
G = 0 C t = Y t I t

y t = Y t/ N t; c t = C t/ N t; k t = K t/ N t

y t = f ( k t) i

1
2

I t = ( n + d ) K t
Ct = Yt It = Yt (n + d)Kt

c = f(k) - (n + d)k k

kG

kG

S t

= sY t,

sY t =

( n + d ) K t

sf ( k ) = ( n + d ) k

y* = f ( k* ); k*
c* = f ( k* ) ( n + d ) k*

:.
:,
Y = AK A

S = sAK
I = dK + dK
dK + dK = sAK
dY/Y = sA d
dY/Y = sA d
4

Capital currency and exchange

1

M1
M2

123

M d = P L ( Y , r + e)

r + e L
L r

M d /P = L ( Y , r + e) M d /P
:
1

1%
1%
5%6%20%

 GDP P YV =

PY / M
M d / P = kY
1/k
5

M
NM

md + nmd
Md + NMd
M + NM
(Md M) + (NMd NM) = 0
(Md M)(NMd NM)

M d /P = L ( Y , r + e) M d /P
M

P = M / L ( Y , r + e)
6

P / P = M / M L(Y,r + e)/ L(Y,r + e)

= M / M Y Y / Y

IS-LM/AD-AS model
1FE

FE

FE
1

MPN

MPN

2IS
IS Y , r
I S

 a
b

IS 1
2

IS

a IS b

G Y-C-G

G E F

IS
IS
3LM

M P MS
MS B
L
M/P

:()

LM

LM

a LM b

4 IS-LM

FE,IS LM
A
FE
LM IS E
1
2
IS IS

 LM
LM FE IS M/P

 a E
b M M/P LM
c M
F
IS LM

F
IS LM

IS-LM IS-LM
12
1

 IS LM

AD
AD

MPK

10

AD-AS
AD-AS