MacroeconomicsIntro

MacroeconomicsIntro - 3. The rest of the world...

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Macroeconomics 1. What is macroeconomics about? a. Unit of observation is a country b. Aggregation of all markets (AS/AD) i. Output (output growth) ii. Inflation iii. Unemployment (employment) iv. Interest rates (real interest rates) c. Distinguishing long run and short run (output path) i. Short-run fluctuations-business cycles ii. Long-run growth d. Macroeconomic policy i. John Maynard Keynes “Great Depression” 1. Pro-active fiscal and monetary policy 2. Controversies in macroeconomics a. Keynesian pro-active, role of federal government (“tax and spend”) b. Chicago school-let markets do their thing, intervention almost always does more harm than good c. Monetarists-LR trends controlled by “MG” i. What is the shape of the AS curve (LR)?
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Unformatted text preview: 3. The rest of the world (international economy) a. Keynesian model: exports and imports b. Balance of payments (financial flows) c. NBER.org i. calls a recession ii. business cycles 4. PPF a. Uses i. Economic growth-shift of the PPF 1. Potential/capacity argument ii. Output growth-change in actual production of point 1. Labor, land, technology, capital b. Market vs command i. Relative prices; no market determined prices c. Trade i. Trade changes a countrys relative prices and allows that country to consume beyond its PPFF ii. Gains from trade is a consumption argument iii. Trade allows a country to specialize/comparative advantage...
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