ECON 303 Intermediate Macroeconomics Instructor: Bernard Malamud Office: BEH 502

1. ECON 303 Intermediate Macroeconomics • Instructor: Bernard Malamud • Office: BEH 502 • Phone (702) 895 –3294 • Fax: 895 – 1354 • Email: bernard.malamud@unlv.edu • Website: www.unlv.edu/faculty/bmalamud • Office hours: TR 12-1 pm; 2:30 – 3:30pm; and by appointment

2. Macro News • 2007 CPI Inflation: 4.1 %, highest in 17 years! • Core CPI up only 2.4%. • 2007 Housing Construction: Down 25% • Clark County Home Sales: New – 45% Existing – 40% • December Index of Industrial Production: No gain • December Index of Leading Indicators: Down 0.4% • December Unemployment Rate: 5.0%, up from 4.7% • December Retail Sales: Down 4% • Index of Consumer Sentiment: Down 18%, Nov - Nov • S & P 500 • December 31, 2007  1468 • January 17, 2008 [Philadelphia Beige Book]  1333 January 22, 2008: 75 Basis Point Fed Funds Rate Cut

3. Macro News • 2008 CPI Inflation: ~1 %, lowest in 40 years! • Core CPI up 2.4%. • 2007 Housing Construction: Down 25% • Clark County Home Sales: New – 45% Existing – 40% • December Index of Industrial Production: - 5 ½ % • December Index of Leading Indicators: Down 0.4% • December Unemployment Rate:6.7%, 7.2% up from 5% last year • December Retail Sales: Down ~4% • Index of Consumer Sentiment: Down ~30%,Nov - Nov • S & P 500 • January 8, 2008  901 vs. December 31,2007  1468 January 22, 2008:75 Basis Point Fed Funds Rate Cut to 4% Latest Target FFRATE: 0 - .25%

4. Today’s Headlines • IMF: Global Stimulus Package • Timely • (as there is an urgent need for action)· Large • (because the drop in demand is large)· Lasting • (as the recession will likely last for some time) · Diversified • (as there is uncertainty regarding which measures will be most effective)· Contingent • (to indicate that further action can be taken)· Collective • (all countries that can should expand G-T given the severity and global nature of the downturn)· • Sustainable • (to avoid debt explosion in the long run and adverse effects in the short run). • Timely • Targeted • Temporary • R o b u s t

5. Stimulus Program Proposals:Re-emergence of Fiscal Policy • Grants/loans to states • “Shovel-ready” infrastructure • Unintended consequence…hold back • Military spending • Green investment • Environment, energy • Tax cuts • Investment tax credit • Sales tax rebate • Automatic stabilizers • $Trillion deficits as far as eye can see

6. Obama Speech: January 8, 2008 • “We could lose a generation of potential and promise, as more young Americans are forced to forgo dreams of college or the chance to train for the jobs of the future,” Mr. Obama said. “And our nation could lose the competitive edge that has served as a foundation for our strength and standing in the world. In short, a bad situation could become dramatically worse.” • He said he aimed to double the production of alternative energy within three years, a seemingly ambitious target; computerize all medical records in the country within five years, a move he said could save lives, money and jobs; modernize 75 percent of federal buildings and improve energy efficiency in 2 million homes; upgrade classrooms, libraries and laboratories in thousands of schools, and expand broadband access to rural areas . • Mr. Obama blamed the current economic morass — in particularly stark terms — on “an era of profound irresponsibility that stretched from corporate boardrooms to the halls of power in Washington.” • “I understand that some might be skeptical of this plan. Our government has already spent a good deal of money, but we haven’t yet seen that translate into more jobs or higher incomes or renewed confidence.” • He insisted that only government could “break the vicious cycles that are crippling our economy,” prevent “the catastrophic failure of financial institutions,” restart the flow of credit and restore the regulations needed to prevent such a crisis in the future. Y = C + I + G + Ex - Im

7. Course Objectives Refresh your command of … • Macroeconomic terminology  eco-talk • Macro Facts • Schools of thought

8. 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 practice • Stabilizing an Unstable Economy • Understanding the current crisis

9. Macro - variables • Output … Real GDP … Growth Rate • Unemployment • Inflation … CPI, GDP Deflator Macro Time Frames • Short-run … sticky price • Medium-run … price adjusts • Long-run … economic growth

10. Where We’re Heading Develop tools to address macro questions: • What drives expansions and recessions? • What holds inflation in check? • Can the unemployment rate be too low? • What causes unemployment? • Why do growth rates differ across countries?

11. 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

19. The Federal Funds Rate and Its “Real” Value • Real interest rate = Nominal rate – Expected Inflation

21. Facilities: Primary dealers, commercial paper TermAssetBackedSecuritiesLoanFacility(TALF) • CITI