ECON 303Intermediate Macroeconomics
Instructor: Bernard Malamud–Office: BEH 502
Phone (702) 895 –3294Fax: 895 – 1354
»Email: [email protected]: www.unlv.edu/faculty/bmalamudOffice hours: MW 11:30 – 12:30 pm, 2:30 – 3:30 pm and by appointment
Course Objectives
Refresh your command of• Macroeconomic terminology
eco-talk• Macro Facts• Schools of thought
Course Objectives• Master MODELS
– Demand Side Models AD• Multiplier• IS – LM
– Supply Side Models AS• Wage setting – Price setting• Phillips Curve
– Role of Expectations … in theory and in practice– Stabilizing an Unstable Economy
• Understanding the financial crisis and Slump
• Revolution and evolution in macro-thought– Solow Growth Model
Macro – variables: Real and Nominal• Output … Real GDP… Growth Rate
Employment – Unemployment• Wage level – Price level
Inflation … CPI, GDP Deflator• Interest rates
Macro Time Frames• Short-run … sticky price• Medium-run … price adjusts• Long-run … economic growth
Macro Facts: Recession and Slump
The LongSlump
6
7
Volcker Disinflation
Oil Shock
Great Recession
Oil Shock
GreatRecession
Volcker Disinflation
OilShock
GreatRecession
Natural RateNatural rate fromCBO based on demographics & changing labor market institutions, e.g., temporary employment.
The Manipulated and Understated LIBOR
London Interbank Offer Rate (LIBOR)
Federal Funds Rate
Macro Facts: Deflation Threat Over???
Macro Facts: Federal Debt
Americans Do Debt
12
Household mortgages
Business debt
Consumer credit
FederalGov’t
Total DebtNon-Financial
Sectors
Macro Facts: Bank Excess Reserves
Macro Facts: Bank Excess Reserves
M1/Monetary Base=M1/(Currency + Reserves)
Macro Facts: Trade Deficit, Goods & Services
Imports
Exports
Major currencies/$
Broad basket of currencies/$
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Average annual rates of growth, 1870-1998, world and main regions
1870 - 1998 1870 - 1913 1913 - 1950 1950 - 1973 1973-1998
World 1.48 1.30 0.91 2.93 1.33
Western Europe
1.74 1.32 0.76 4.08 1.78
Europe1
Western offshoots(b)
1.87 1.81 1.55 2.44 1.94
Japan 2.63 1.48 0.89 8.05 2.34
Asia (excluding Japan)
1.33 0.38 -0.02 2.92 3.54
Latin America 1.41 1.81 1.42 2.52 0.99Eastern Europe 1.22 1.15 1.50 3.49 -1.10
Africa0.88 0.64 1.02 2.07 0.01
Where to Find the Numbers• http://research.stlouisfed.org/fred2/• www.bls.gov/data/• www.economist.com• www.bea.doc.gov• http://www.gpoaccess.gov/eop/• www.oecd.org
MacroeconomicsThe course is divided in three parts: Short -run / Medium-run / Long-run
Short – run (sticky price): IS / LM ADIS: Y = C + I + G
C = c0 + c1 YD = c0 + c1 (Y - T) I = I0 + b1 Y - b2 i
Y = {spending multiplier} x {autonomous spending}
LM: (M/P)d = (M/P)s
(M/P)d = L(Y,i)Ms = [1/(c + r(1-c))]H= {money multiplier} x {monetary base}
Medium – run (flexible price): AD/ASIS/LM ADPS/WS AS
PS: P = (1+ μ)(W/A)WS: W= Pe Ae f(u,z)
In medium - run, Pe = P (W/P)WS = (W/P)PS = A / (1+ μ) Natural/Structural/Equilibrium Rate of Unemployment (un )“Full - employment” rate of output (YFE) The Green Shaft
SRAS and MRAS
When AD or AS shift: MR equilibrium SR equilibrium P new MR equilibrium
Long – run (factor supplies change): GrowthSteady state: s(Y/AN) = (δ + gN + gA )(K/AN)
For simple Cobb-Douglas function: Y = Kα (AN)1-α Y/AN = {s/((δ + gN + gA )}α/(1-α)
Golden - rule saving rate = α
Productivity and equilibrium rate of unemployment: Ae = A only in long - run “Natural rate” decreases with unexpected increase in A
Americans Do Debt
22
Household mortgages
Business debt
Consumer credit
FederalGov’t