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1 I NTERMEDIATE M ACROECONOMIC A NALYSIS (E CON 325 ): O VERVIEW J ANUARY 24, 2011 January 24, 2011 2 B UILDING B LOCKS OF AN E CONOMY Introduction MACROECONOMY PRIVATE SECTOR PUBLIC SECTOR (GOVERNMENT) CONSUMERS FIRMS Interact through three types of markets: 1. Goods markets 2. Labor markets 3. Capital/asset markets Interact through policy: 1. Monetary policy (interest rates) 2. Fiscal policy (taxes and government spending) Macroeconomic Outcomes: 1. GDP 2. Inflation 3. Unemployment 4. Trade balances 5. Etc. etc. .. Microeconomic Foundation: Utility Maximization Microeconomic Foundation: Profit Maximization Modern Macroeconomic Theory: Build a theory of aggregate outcomes by studying microeconomic decisions and interactions between firms and consumers Can we feasibly model the decisions of every consumer and firm and every interaction between them?. ..probably not… AGGREGATE OUTCOMES Recent events suggest regulatory policy also plays a critical role
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2 January 24, 2011 3 R EPRESENTATIVE- A GENT M ACROECONOMICS Introduction ±
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