Macroeconomics

1. Macroeconomics

2. Textbook: Macroeconomics 9th edition • Greg Mankiw • Required Text: Mankiw, N. Gregory - Macroeconomics, 9th edition (Worth Publishers) Solutions Manualfor the text is on reserve in our library.

3. Book’s organization • 1– Introduction to macroeconomics • - Concepts and Economic data • Chapters 1 and 2. • 2– Long-run macroeconomic analysis • - Classical model • - Robert Solow’s growth model • Chapters 3, 4, 5, 6, 8 and 9. • 3– Short-run macroeconomic analysis • - Business cycle • Chapters 10, 11, 12, 13 and 14 • 4– Macroeconomic Stabilization policies • Chapter 18

4. Economic Growth and Fluctuations • Figure shows the long-term growth trend and cycles.

7. National Income and Product Accounts (NIPA) Gross Domestic Product: Third Quarter 2017 (Advance Estimate)

8. annual growth rate of income per capita • percentage increase in standard of living after… Huge effects from tiny differencesin growth rates • …25 years • …50 years • …100 years • 2.0% • 64.0% • 169.2% • 624.5% • 2.5% • 85.4% • 243.7% • 1,081.4%

9. Growth Experiences of Seven Countries

10. The Emergence of a Single American Standard of Living: Regional Per Capita Income as a Percentage of National Average 

11. Economic growth in Central and South America and Africa has been persistently slow. The gap between the United States and these regions has widened.

12. THE GLOBAL ECONOMY • Where Is the Global Pie Baked? • In 2013, global production was worth about $87 trillion.

14. How many minutes to earn the price of a Big Mac?

15. Inflation • The inflation rate fluctuates, but it is always positive—the price level has not fallen during the years shown in the figure. • A falling price level—a negative inflation rate—is called deflation.

16. Inflation In Germany in 1923 • Elderly Germans can still recall the days in 1923 when: • “ People were bringing money to the bank in the • cardboard boxes and laundry baskets. I can still • see my brothers coming home Saturdays with • heaps of paper money. When the shops reopened • after the weekend they got no more than a • breakfast roll for it. Many got drunk on their pay • because it was worthless on Monday.” • Source: Alice Siegert, “When inflation Ruined Germany,” Chicago Tribune, November 30,1974.

17. November 22, 2017 Report

18. THE CONSUMER PRICE INDEX • Figure shows the CPI in part (a) and the inflation rate in part (b).

19. Price Level, Inflation, and Deflation • Core Inflation • The figure shows the CPI inflation rate. • Thecore inflation rate is the CPI inflation rate excluding the volatile elements (of food and fuel). • The core inflation rate attempts to reveal the underlying inflation trend.

20. NOMINAL AND REAL VALUES Figure shows real and nominal interest rates: 1973 to 2013. The real interest rate is usually positive, but during the 1970s it became negative. The gap between the nominal interest rate and the real interest rate equals the inflation rate.

21. The figure shows the percentage unemployed at four unemployment durations. • Long-term unemployment (purple bar) barely exits at a business cycle peak in 2000, but it is large in 2013.

22. LABOR MARKET TRENDS AND FLUCTUATIONS • The labor force participation rate of women has increased. • The labor force participation rate of men has decreased.

23. Employment and Unemployment • Figure 22.3 shows that the labor force participation rate and the employment-to-population ratio both trended upward before 2000 and downward after 2000.

25. Macroeconomic Policy Challenges and Tools • Two broad groups of macroeconomic policy tools are : • Fiscal policy—making changes in tax rates and government spending • Monetary policy—changing interest rates and changing the amount of money in the economy

26. What We Produce: Broad Categories

27. What We Produce: Some of the Details

28. For Whom? Functional Distribution of Income

29. For Whom? Personal Distribution of Income

30. Topics for today • Economic model • Endogenous and Exogenous variables • Measurement in Macroeconomics • Chain weight index