1 / 16

MG4014 Macroeconomics

MG4014 Macroeconomics. AS/AD. Today. Aggregate Supply and Demand Derivation of Market Clearing Conditions A look at Unemployment Wages and Cost-Push in Ireland. Notation. AD Aggregate Demand AS Aggregate Supply C Consumption I Investment w wage rate N population/ employed

cachet
Download Presentation

MG4014 Macroeconomics

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. MG4014 Macroeconomics AS/AD

  2. Today Aggregate Supply and Demand Derivation of Market Clearing Conditions A look at Unemployment Wages and Cost-Push in Ireland

  3. Notation AD Aggregate Demand AS Aggregate Supply C Consumption I Investment w wage rate N population/ employed B bonds issued

  4. Aggregate Supply and Demand Q1: Does a macroeconomic equilibrium exist? Q2: If the answer to Q1 is true, then will this equilbrium generate full employment? We’ve already talked about measuring total output, so revise your notes on GDP, GNI, etc.

  5. Aggregate Supply The total supply of goods and services produced in the economy in a given period AS = (net output per hour)*(total hours of employment) = yN

  6. Aggregate Demand AD is the total demand for goods and services in an economy in a given period. AD = C+I C = cwN AD= C+I- cwN+I

  7. Balance Condition Total Saving = wages saved + all profit income = Nc(1-c)+N(y-w) = Nw-Nwc+Ny-Nw =Ny-Nwc

  8. Market Clearing AS = yN=cwN+I = AD

  9. Price Level Aggregate supply Aggregate demand Quantity of Equilibrium Output output 0

  10. Unemployment and Government Fiscal Policy AD = C+ I + B = cwN + I + B AS = yN = cwN + I + B = AD yN- cwN = I + B N(y-cw) = I+B So N* = (I+B)/(y-cw)

  11. Stylised Facts 1. High employment sustained over a few years will reduce profits. This is called the high-employment squeeze. 2. The availability of imports for an country’s goods place additional limits on the effectiveness of macro policies aimed at high employment.

  12. Stylised Facts 3. Monetary policy and fiscal policy approaches to job creation are both effective and in different ways, and they may work at cross purposes. 4. Sustained high employment levels are possible, but we have to change the policy mix as we move through the business cycle.

  13. Cost-Push Inflation

  14. Materials Push

  15. Next (and last) Time • Inflation and growth • Read Bowles et al, chapter 18.

More Related