CH8 SH - The Core of Macroeconomic Theory To recall. The...

Info iconThis preview shows pages 1–10. Sign up to view the full content.

View Full Document Right Arrow Icon
The Core of Macroeconomic Theory To recall… The three chief concerns of macroeconomists - the level of GDP, the overall price level, and the level of employment - are influenced by events in three broadly defined “markets”: Goods-and-services market Financial (money) market Labor market We will explore these markets, and their links, over the next few weeks.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Important to realize that production, consumptions, etc. are continuous activities, but here, we assume they take place in a particular period, or series of periods. We step back at the end of each period and survey the results. The Core of Macroeconomic Theory
Background image of page 2
The Core of Macroeconomic Theory
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
The Basic Keynesian Macro-economic Model The Keynesian model assumes that producers meet demand at preset prices. All of the adjustment is in quantity The shortcoming of the assumption is that it does not explain changes in prices and inflation.
Background image of page 4
The Keynesian Theory of Consumption Other Determinants of Consumption Planned Investment ( I ) The Determination of Equilibrium Output (Income) The Saving/Investment Approach to Equilibrium Adjustment to Equilibrium The Multiplier The Multiplier Equation The Size of the Multiplier in the Real World Aggregate Expenditure and Equilibrium Output
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Aggregate Expenditure and Equilibrium Output Note 1: Begin by explaining equilibrium output in an economy w/no government. Then discuss how an economy that is out of equilibrium moves back into equilibrium. ‘Y’ used to refer to both aggregate output & aggregate income because of the equality in a given period . Is ‘real’ output, not nominal.
Background image of page 6
Note 2: Real Terms: When we talk about output ( Y ), we mean real output (real GDP), not nominal output (P x Y). The main point is to think of Y as being in real terms— the quantities of goods and services produced, not the dollars circulating in the economy.
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
We distinguish between economics concepts that are stocks or flows Flow concepts are per unit of time Stock concepts have no time element Income (Y), consumption (C) and saving (S) are flow concepts – Why? Savings, wealth, money in your bank account, the level of employment are stock concepts – Why? What is the government deficit? What is the level of the national debt?
Background image of page 8
Aggregate Expenditure and Equilibrium Output aggregate output The total quantity of goods and services produced (or supplied) in an economy in a given period. aggregate income The total income received by all factors of production in a given period. aggregate output (income) ( Y ) A combined term used to remind you of the exact equality between aggregate output and aggregate income. In any given period, there is an exact equality between
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 10
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 52

CH8 SH - The Core of Macroeconomic Theory To recall. The...

This preview shows document pages 1 - 10. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online