The model through Chapter 5
A: Total demand for goods,(Z):
Total demand is defined as,
Z C + I + G + X IM
To make things simpler we will ignore the foreign sector and focus on a closed economy,
therefore:
Z C+I+G
We can break out the components of demand
10/12/16
Hayek
developed Smiths ideas of the
coordinating role of decentralized
markets further.
Key function of markets: to provide
information.
Markets collect and distribute information at
relatively low costs.
In this way, markets operated like an
Math 128 Section 6.1 Average Value
Average Value of a Function:
1
()
Examples: Find the average value of the function over the given interval.
Ex 1: () = 1 + on = 0 to = 2.
Ex 2: () = 5 + 4 2 on [0,3].
1
2
Ex 3: The high temperature in New England in N
9/18/16
Calculated
growth rates and inflation
rates.
Business cycles
GDP and welfare problems and debates
Alternatives: human development index
Whats missing from GDP?
Third party criterion
TODAY: finish up measurement
macroeconomic equilibrium/adjustme
9/13/16
GDP
the total market (monetary) value of
final goods and services newly produced
within a countrys borders over a given time
period.
Accounting for GDP
EXPENDITURES Y = C + I + G + (X-M)
PRODUCTION
INCOME National Income
Adjusting
Economic
Math 128 Section 7.3 Fundamental Theorem of Calculus
If () is a continuous function on .
() = () ()
Examples: Evaluate the integrals.
4
Ex 1: 0 6
4 1
Ex 2: 1
3 2
Ex 3: 0
2 +1
1
2
1
2
Ex 4: 0
Ex 5: 5 2 3
Improper Integrals:
() =
() =
1
Ex 6: 1
2
3
Math 128 Section 7.4 Integration by Parts
1
Integration by Parts
Product Rule
When integrating two functions multiplied together, when there is no relationship
between the two functions, we use the method of integration by parts.
Integration by Parts:
()
Math 128
Exam #2
Fall 2015
SPECIAL CODE: 111901
Name _
Signature: _
~
Academic Honesty Statement: By signing my name above, I acknowledge that I understand
each of the following behaviors:
using a calculator on a cell phone (or any other communication tec
Math 128 Section 7.1 Constructing Anti-Derivatives Analytically
An anti-derivative, or integral, is the opposite of the derivative.
For example:
Find [ 3 + 5] =
Then, 3 2 =
Integration Rules:
=
1
+1
+1 +
= +
Examples: Evaluate the integrals.
Ex 1: (
Math 128 Section 6.2 Consumer and Producer Surplus
p
1
Supply
(price/unit)
p*
Demand
q*
q (quantity)
Equilibrium: ( , )
Equilibrium:
Consumer Surplus: measures the consumers gain from buying a product for less
than they were willing to pay.
Producer Surpl
Math 128 Section 6.3 Present and Future Values
1
Present Value = 0 ()
Future Value = Present Value*
() = rate at which payments are made ($/year)
= interest rate
= years into the future
Ex 1: a.) If you make a lump sum payment now, how much should you
Econ 204 10/4
The price index has a base of value of 100. You must divide index by 100 before doing calculations.
Classical = D=S
Keynesian = S>D, in this model, wages are sticky and do not fall so that supply = demand.
Unemployment is reduced by incre
Econ 204 9/27
Aggregate Supply
a.) Fixed Price Level
Aggregate supply: The production side of the macro-economy
Imagine the price level was fixed at a particular level (P*) and couldnt change
As long as it was profitable to do so, firms would produce a
Econ 204 10/6
Hayek, Markets, and Information
Hayek developed Smiths ideas of the coordinating role of decentralized markets further.
Key function of markets: to provide information
market college and distribute information at relatively low costs.
In
10/6/16
The
real value of a variable is equal to the
nominal (current) value divided by the
price index.
REMEMBER: the price index has a base
value of 100. Therefore, YOU MUST DIVIDE
THE INDEX BY 100 BEFORE DOING YOUR
CALCULATIONS.
Example. Current GD
11/8/16
Market
failure a situation in which free
markets fail to achieve an efficient
allocation of resources.
Example: prices fail to adjust so that demand =
supply.
Example: over-production of something harmful.
Example: a situation in which some pe
9/26/16
Keynesian
theory of aggregate demand
and the consumption function
Marginal propensity to consume and the
multiplier.
Extend the model: IS and LM curves
The IS curve all combinations of Y and r
in which Investment = Savings.
Money supply definitio
11/3/16
Monetary
Policy: money creation and
high-powered money/monetary base
Creating money
Open market operations
Discount window
Reserve requirement
of monetary policy
Quantity theory of money
TODAY: Monetary policy, cont. and
unemployment (Chapter
9/21/16
Unpaid
household work and the depletion of
natural resources.
Demand-side equilibrium
Y = C + I + G + (X-M)
Same as SAVINGS = INVESTMENT (Y C = I)
This may not hold EX ANTE, but the equality must hold EX
POST
How to adjust to make sure savi
11/1/16
What
is money and the money supply?
Types of money
Definitions of M1, M2, and M3
Money
supply and inflation
If the supply of output does not change, increases in
the money supply raise prices.
Banks
as financial intermediaries.
Policy. Chap