Macroeconomics 31 220 Introduction to Macroeconomics 1. Aspects of course organisation

1. Macroeconomics 31 220 • Introduction to Macroeconomics • 1. Aspects of course organisation • Co-ordinator • Roy Grieve • Office: Curran 4.53 • Phone: 0141 548 3852 • Email economics@strath.ac.uk • Lecturer (Introduction and The “Classical” Model) • Peter McGregor • Office: Curran 4.41 • Phone: 0141 548 3848 • Email p.mcgregor@strath.ac.uk • Lectures • Two lectures a week for 12 weeks • Two parallel groups, A and B • Topic of each lecture is in the Course Outline

2. Group A • Tuesday 10-11 Royal College 345 • Thursday 10-11Royal College 512 • Group B • Tuesday 2-3 Thomas Graham 123 • Thursday 2-3 Thomas Graham 123 Tutorials • Six tutorials during the semester • Weeks 4, 5, 8, 10, 11 and 12 • Sign up sheets will go up in Weeks 1 (or maybe 2) • Set Texts • Macroeconomics • 7th edition • Dornbusch, Fischer & Startz • McGraw-Hill • GB pounds 26.99 • Three Star recommendation • Copies in Short Loan Collection

3. Assessment • Three components • Class Test (20% of class mark, Lecture 14) • Group Presentation (10% of class mark, tutorial week 11) • Exam (70% of class mark) • If you pass the exam (40% or higher), but fail overall. • We will credit you with a Pass mark of 40% • Resit marks are based on resit exam mark only • i.e. course work not taken into account Web • We’re on the Web… (http://www.economics.strath.ac.uk) • Generally, diagrams for lectures will be available in advance

4. Special Needs • Students with Special Needs see me ASAP • If you feel you may need additional support or equipment and have not spoken to anyone at Strathclyde yet, contact • Student Advisor (Special Needs) • Anne Simpson • Aims • understanding of analytic methods, theory-based and model-based arguments; • ability to discuss and reflect on government policy and to assess the performance of the UK and other economies. • sound knowledge of core economic theory

5. 2. An Introduction to Macroeconomics • What is Macroeconomics? • Sub-field of economics • Determination of aggregate variables • e.g. unemployment • inflation • national output / income • General equilibrium / system wide view • all “parts” of economy are inter-connected • if something happens to one part of economy it will have impact all over • Strong policy orientation • political importance macro variables

6. Structure of Economic Models • “Appreciate the common structure of the macroeconomic models that you study.” • endogenous variables • exogenous variables • equilibrium concept • how the model behaves in disequilibrium • does the model return to an equilibrium?

7. Microeconomic Example: Market for Duff Beer Price Duff beer supply p* demand 0 Quantity Duff beer q*

8. Represent model with Supply & Demand diagram. • Endogenous variables • explained within model • i.e. price of Duff beer • quantity of Duff beer traded • Exogenous variables • not explained by model but which affect model • variables that affect position demand & supply curves • e.g. temperature • price of hops (input) • Equilibrium concept • price at which demand equals supply

9. Price Duff beer supply p* demand 0 Quantity Duff beer q*

10. Comparative Statics • “Become proficient in the technique of comparative statics” • Compare two equilibria to see how endogenous variables change following change in exogenous variable(s) • Example: Heat wave in Springfield • Exogenous variable (temperature) changes • Demand curve shifts to right (D0 D1) • At old equilibrium price p0 have xs demand • price rises move up D1 and up S0 xs demand falls • reach new equilibrium at (p1, q1) • Compare new & old equilibria • p, q

11. Price Duff beer supply p1 p0 D1 D0 0 Quantity Duff beer q0 q1 q2

12. Why do we use different macro models? • Competing models v Alternative models • Competing - only one model “true” & all others “false” • Alternative - different models for different circumstances • Distinction over simplistic, but can be useful • e.g. AS-AD different views world v over time

13. ASc ASw Price level ASk AD 0 Output