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Macroeconomics by G.Mankiw

Macroeconomics by G.Mankiw. PART 1, CHAPTER 1 : The Science of Macroeconomics Lecture 1 Source : Slide Database by Ron Cronovich + Slides by Nathalie Bolh. Learning objectives. This chapter introduces you to some important concepts in macroeconomic analysis

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Macroeconomics by G.Mankiw

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  1. Macroeconomics by G.Mankiw PART 1, CHAPTER 1 : The Science of Macroeconomics Lecture 1 Source : Slide Database by Ron Cronovich + Slides by Nathalie Bolh

  2. Learning objectives This chapter introduces you to • some important concepts in macroeconomic analysis • the issues macroeconomists study • the tools macroeconomists use

  3. What is Macroeconomics? • A global definition • Explanations and Policy prescriptions • Macroeconomics+ Microeconomics = Economics • The study of macroeconomic variables

  4. Important issues in macroeconomics • 3 major indicators of economic performance : - GDP and Growth - Unemployment rate - Inflation rate • 3 major economic areas under review : the USA, the EU and Japan

  5. Recent data in the USA

  6. Recent Data in the EU

  7. Recent Data in Japan

  8. Economic models Mathematics Observation of data => simplified reality

  9. The example of a model of supply and demand for rice • explains the factors that determine the price of Manggo and the quantity sold. • assumes the market is competitive • Variables: Qd = quantity of rice that buyers demand Qs = quantity that producers supply P = price of rice Y = aggregate income Pg = price of grapes (an input)

  10. The rice market • The supply for rice : Qs= S(P+, Pf-) • The demand for rice : Qd=D(P-, Y+)

  11. P Price of rice S equilibrium price Q Quantity of rice D equilibriumquantity The market for rice: equilibrium

  12. P Price of rice S P2 P1 D2 D1 Q Quantity of rice Q1 Q2 The effects of an increase in income:

  13. Endogenous vs. exogenous variables: • The values of endogenous variables are determined in the model. • The values of exogenous variables are determined outside the model: the model takes their values & behavior as given.

  14. Prices: Flexible Versus Sticky • Market clearing: an assumption that prices are flexible and adjust to equate supply and demand. • In the short run, many prices are sticky. • In models : Prices are supposed to be sticky in the short run and flexible in the long run.

  15. Question  1) Macroeconomic issues in the news over the last month?  2) What would be the effect of an increase in the price of Fertilizers on the rice market equilibrium 3)Give the 2 definitions of a recession (the NBER definition and the popular definition) 4)Identify the main recession episodes in the Indonesia economy since 1900 

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