Lecture macroeconomics chapter 1 introduction to macroeconomic policy issues and data

MACROECONOMICS Lecturer: MSc Nguyen Thuy Dung www.hutech.edu.vn/quocte SYLLABUS ❑Course objectives: Students are aimed to (a) understand how to evaluate macroeconomic conditions such as unemployment, inflation, and growth (b) understand how monetary policy and fiscal policy can be used to influence short-run macroeconomic conditions (c) understand media macroeconomic events Institute of International Education accounts of SYLLABUS SYLLABUS ❑Student tasks: ▪Class attendance: ▪Actively participate in-class activity ▪Complete all homework (if any) and other tasks ▪Don’t have private conversation or arrive at class late Institute of International Education SYLLABUS COURSE GRADE ▪Mid term test: 30% including multiple choice and short-answer questions, individual ▪Final exam: 70% - Final Examination Mode: Essay - Duration: 90 minutes - Students are NOT allowed to use materials Institute of International Education COURSE GRADE BOOKS AND READING ▪Mankiw, N G., (2015) Principles of Economics – 7th edition, CENGAGE Learning ▪Mankiw, N G., (2009) Macroeconomics – 7th edition ▪Lecturer’s contact: Email: nguyendung3691@gmail.com Institute of International Education BOOKS & READINGS FYI: HOW TO READ YOUR TEXTBOOK 1.Read before class 2.Summarize, don’t highlight 3.Test yourself Try “Quick Quiz” that follows each section 4.Do not skip real world examples Institute of International Education BOOKS & READINGS In microeconomics, households choose their purchases to maximize their level of satisfaction, “their utility”, and firms make production decisions to maximize their profits Macroeconomic events arise from the interaction of many households and firms Therefore, when we study macroeconomics, we must consider microeconomic foundations Institute of International Education TOPIC CONTENTS 01 02 03 INTRODUCTION TO MACROECONOMIC POLICY ISSUES AND DATA MACROECONOMIC IN THE LONG-RUN MONEY AND PRICES IN THE LONG-RUN 04 05 OPEN ECONOMIES SHORT-RUN ECONOMIC FLUCTUATIONS Institute of International Education CONTENTS INTRODUCTION TO MACROECONOMIC POLICY ISSUES AND DATA Topics to be discussed Institute of International Education 1.1 The science of Macroeconomics 1.2 The data of Macroeconomics 1.1 The Science of Macroeconomics This section introduces you to: ▪ the issues macroeconomists study ▪ the tools macroeconomists use ▪ some important concepts in macroeconomic analysis Institute of International Education Important issues in macroeconomics Macroeconomics, the study of the economy as a whole, addresses many topical issues: ▪ Why have some countries experienced rapid growth in incomes over the past century while others stay in poverty? ▪ Why some countries have high rates of inflation while others maintain stable prices? ▪ Why all countries experience recessions and depressions? Can the government anything? ▪ …… Institute of International Education U.S Real GDP per capita Real GDP measures the total income of everyone in the economy Institute of International Education U.S Inflation rate (% per year) The inflation rate measures the percentage change in the average level of prices from the year before Institute of International Education U.S Unemployment rate (% labor force) The unemployment rate measures the percentage of people in the labor force who not have jobs Institute of International Education Economic models …are simplified versions of a more complex reality ▪ irrelevant details are dispensed …are used to ▪ show relationships between variables ▪ explain the economy’s behavior ▪ devise policies to improve economic performance Institute of International Education Endogenous vs exogenous variables ▪ Endogenous variables are those which the model tries to explain ▪ Exogenous variables are those variables that a model takes as given Exogenous variables Institute of International Education MODEL Endogenous variables Functions to Express Relationships Among Variables ▪ General functional notation shows only that the variables are related Q d = D (P,Y ) Q d = quantity of pizzas that buyers demand P = price of pizza Y = aggregate income ▪ A specific form shows the precise A list functional of the quantitative relationship variables d that affect Q ▪ Example: D (P,Y ) = 60 – 10P + 2Y Institute of International Education The Model of Supply and Demand Demand equation: Supply equation: Q d = D (P,Y ) Q s = S (P, Pm) Economist assumes that price of pizza adjusts until Q d equal Q Qd=Qs Supply Price P* E Demand Q* Quantity Supply-and-demand diagram Institute of International Education It describes the relationship between buyers and sellers in the market The point of intersection is called an equilibrium s Example: The market for pizza The demand curve shows the relationship between quantity demanded and price, other things equal equilibrium price The supply curve shows the relationship between quantity supplied and price, other things equal P S E D Q equilibrium quantity At the equilibrium price, consumers choose to buy the amount of pizza that pizzerias choose to produce Institute of International Education Changes in Equilibrium 1) The effects of an increase in income demand equation: Q d = D (P ,Y ) An increase in income increases the quantity of pizza consumers demand at each price… …which increases the equilibrium price and quantity Institute of International Education P A shift in Demand Price of pizza S P2 P1 D1 Q1 Q2 D2 Q Quantity of pizza ... Education 1. 1 The science of Macroeconomics 1. 2 The data of Macroeconomics 1. 1 The Science of Macroeconomics This section introduces you to: ▪ the issues macroeconomists study ▪ the tools macroeconomists... we study macroeconomics, we must consider microeconomic foundations Institute of International Education TOPIC CONTENTS 01 02 03 INTRODUCTION TO MACROECONOMIC POLICY ISSUES AND DATA MACROECONOMIC. .. MONEY AND PRICES IN THE LONG-RUN 04 05 OPEN ECONOMIES SHORT-RUN ECONOMIC FLUCTUATIONS Institute of International Education CONTENTS INTRODUCTION TO MACROECONOMIC POLICY ISSUES AND DATA Topics to