CFA Level I – Macroeconomics

Presented by: Aditya Ahluwalia

www.finstructor.in
 GDP – total market value of goods and
services produced in a country within a certain
time period
> Transfer payments not included
> Uses market value of goods and services
> Uses only goods produced within that period
> Intermediate goods are not included
 Sum of value added and value of final output
method
Nominal and Real GDP
 Expenditure approach
 National income – income received by all
factors of production that create final output
 Personal income – pretax income to
households
 Aggregate demand

 Consumption – Marginal propensity to

consume (MPC) and Marginal propensity to
Save (MPS). MPC + MPS = 100%
 Investment – Int rates and profitability
 Government purchases – tax revenue (can be
considered independent)
 Net exports – relative prices of goods
IS curve
IS Curve
LM Curve
LM Curve
Aggregate Supply
 Shift in aggregate demand

 Increase in consumers’ wealth

 Business expectations
 Consumer expectations
 Higher capacity utilization
 Expansionary monetary policy
 Expansionary fiscal policy
 Exchange rates
 Global economic growth
Shift in SRAS
Shift in LRAS
Long run equilibrium
Disequilibrium
Adjustment to increase in demand
Adjustment to decrease in demand
 Implications for analysis

Recessionary Gap
 Implications for analysis

Inflationary Gap
 Implications for analysis

Inflationary Gap
Stagflation
1. Labor supply
2. Human capital
3. Physical capital stock
4. Technology
5. Natural resources
Production Function
 Business Cycle

 Keynesian school – level of optimism of those

who run businesses
 New Keynesian school – downward sticky
wages
 Monetarist
 Austrian school – government intervention
 New classical school – changes in technology
and external shocks
Economic Indicators
Economic Indicator