1、slide 0This chapter introduces you tothe issues macroeconomists studythe tools macroeconomists usesome important concepts in macroeconomic analysisslide 1Why does the cost of living keep rising?Why are millions of people unemployed, even when the economy is booming?Why are there recessions? Can the
2、government do anything to combat recessions? Should it?slide 2What is the government budget deficit? How does it affect the economy?Why does the U.S. have such a huge trade deficit? Why are so many countries poor? What policies might help them grow out of poverty?slide 33,0004,0005,0006,0007,0008,00
3、09,00010,0001970197519801985199019952000long-run upward trendslide 43,0004,0005,0006,0007,0008,0009,00010,0001970197519801985199019952000Recessionslongest economic expansion on recordslide 51.The macroeconomy affects societys well-being.example: Unemployment and social problemsslide 6Each one-point
4、increase in the unemployment rate is associated with: 920 more suicides（自杀） 650 more homicides（杀人） 4000 more people admitted to state mental institutions（精神病院） 3300 more people sent to state prisons 37,000 more deaths increases in domestic violence and homelessnessslide 71.The macroeconomy affects s
5、ocietys well-being.example: Unemployment and social problems2.The macroeconomy affects your well-being.example 1: Unemployment and earnings growthexample 2:Interest rates and mortgage paymentsslide 8slide 9For a $150,000 30-year mortgage: $11,782$9816.84%Dec 2001$12,771$10647.65%Dec 2000annual payme
6、ntmonthly paymentactual rate on 30-year mortgagedateslide 101.The macroeconomy affects societys well-being.example: Unemployment and social problems2.The macroeconomy affects your well-being.example 1: Unemployment and earnings growthexample 2:Interest rates and mortgage payments3.The macroeconomy a
7、ffects politics & current events.example: Inflation and unemployment in election yearsslide 11year U rate inflation rate elec. outcome19767.7%5.8%Carter (D)19807.1%13.5%Reagan (R)19847.5%4.3%Reagan (R)19885.5%4.1%Bush I (R)19927.5%3.0%Clinton (D)19965.4%3.3%Clinton (D)20004.0%3.4%Bush II (R)slide 12
8、are simplied versions of a more complex reality irrelevant details are stripped awayUsed to show the relationships between economic variables explain the economys behavior devise policies to improve economic performanceslide 13explains the factors that determine the price of cars and the quantity so
9、ld.assumes the market is competitive: each buyer and seller is too small to affect the market priceVariables:Q d = quantity of cars that buyers demandQ s = quantity that producers supplyP = price of new carsY = aggregate incomePs = price of steel (an input)slide 14shows that the quantity of cars con
10、sumers demand is related to the price of cars and aggregate income. demand equation: (,)dQD P Yslide 15General functional notation shows only that the variables are related:(,)dQD P YA list of the variables that affect Q dslide 16General functional notation shows only that the variables are related:
11、(,)dQD P YA specific functional form shows the precise（准确地） quantitative relationship:Examples:1) (,)60102dQD P YPY0.32) (,)dYQD P YPslide 17Q Quantity of carsP Price of carsDThe demand curve shows the relationship between quantity demanded and price, other things equal. demand equation: (,)dQD P Ys
12、lide 18Q Quantity of carsP Price of carsDsupply equation: (,)ssQS P PSThe supply curve shows the relationship between quantity supplied and price, other things equal. slide 19Q Quantity of carsP Price of carsSDequilibrium priceequilibriumquantityslide 20D2Q Quantity of carsP Price of carsSD1Q1P1An i
13、ncrease in income increases the quantity of cars consumers demand at each pricewhich increases the equilibrium price and quantity.P2Q2demand equation: (,)dQD P Yslide 21Q Quantity of carsP Price of carsS1DQ1P1An increase in Ps reduces the quantity of cars producers supply at each pricewhich increase
14、s the market price and reduces the quantity.P2Q2S2supply equation: (,)ssQS P Pslide 22The values of endogenous variables（内生变量） are determined in the model.The values of exogenous variables （外生变量）are determined outside the model: the model takes their values & behavior as given.In the model of supply
15、 & demand for cars,endogenous: , , dsPQQexogenous: , sYPslide 231.Write down demand and supply equations for wireless phones; include two exogenous variables in each equation. 2.Draw a supply-demand graph for wireless phones.3.Use your graph to show how a change in one of your exogenous variables af
16、fects the models endogenous variables. slide 24No one model can address all the issues we care about. For example, If we want to know how a fall in aggregate income affects new car prices, we can use the S/D model for new cars. But if we want to know why aggregate income falls, we need a different m
17、odel. slide 25So we will learn different models for studying different issues (e.g. unemployment, inflation, long-run growth). For each new model, you should keep track of its assumptions, which of its variables are endogenous and which are exogenous,the questions it can help us understand, and thos
18、e it cannot.slide 26Market clearing: an assumption that prices are flexible and adjust to equate supply and demand. In the short run, many prices are sticky-they adjust only sluggishly(缓慢地) in response to supply/demand imbalances. For example, labor contracts that fix the nominal wage for a year or
19、longer magazine prices that publishers change only once every 3-4 yearsslide 27The economys behavior depends partly on whether prices are sticky or flexible:If prices are sticky, then demand wont always equal supply. This helps explain unemployment (excess supply of labor) the occasional inability o
20、f firms to sell what they produceLong run: prices flexible, markets clear, economy behaves very differently. slide 28Introductory material (chaps. 1 & 2)Classical Theory (chaps. 3-6) How the economy works in the long run, when prices are flexibleGrowth Theory (chaps. 7-8)The standard of living and i
21、ts growth rate over the very long runBusiness Cycle Theory (chaps 9-13)How the economy works in the short run, when prices are sticky. slide 29Policy debates (Chaps. 14-15)Should the government try to smooth business cycle fluctuations? Is the governments debt a problem? Microeconomic foundations (C
22、haps. 16-19)Insights from looking at the behavior of consumers, firms, and other issues from a microeconomic perspective.slide 301.Macroeconomics is the study of the economy as a whole, includinggrowth in incomeschanges in the overall level of pricesthe unemployment rate2.Macroeconomists attempt to
23、explain the economy and to devise policies to improve its performance.slide 313.Economists use different models to examine different issues.4.Models with flexible prices describe the economy in the long run; models with sticky prices describe economy in the short run.5.Macroeconomic events and performance arise from many microeconomic transactions, so macroeconomics uses many of the tools of microeconomics.
