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Macroeconomics

Macroeconomics. The course is divided in three parts: Short -run / Medium-run / Long-run. Short - run: IS / LM  AD. LM: (M/P) d = (M/P) s (M/P) d = L(Y,i) M s = [1/(c + r(1-c))]H = {money multiplier} x {monetary base}. IS: Y = C + I + G

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Macroeconomics

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  1. Macroeconomics The course is divided in three parts: Short -run / Medium-run / Long-run Short - run: IS / LM  AD 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} IS:Y = C + I + G C = c0 + c1 YD = c0 + c1 (Y - T) I = I0 + b1 Y - b2 i  Y = {spending multiplier} x {autonomous spending} Medium - run: AD/AS IS/LM  AD PS/WS  AS PS: P = (1+ μ)(W/A) WS: W= Pe Ae f(u,z)  SRAS and MRAS Phillips Curve + Okun’s Law + gm = gy + π  M policy • 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 When AD or AS shift: MR equilibrium  SR equilibrium P  new MR equilibrium Productivity and equilibrium rate of unemployment: Ae = A only in long - run  “Natural rate” decreases with unexpected increase in A Long - run: Growth Steady 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

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