Summary
ECO1011s- Macroeconomics summary
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SUMMARY NOTES of Unit 9, unit 10, unit 13 & exchange rates. First-year second-semester macroeconomics notes.
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marginalelasticity 'of demand
cost din prices
price
wage price spiral ↓ ↓
= -
real &
price level
= : in
wages
= = in
wages
wages price
" Changes in labour supply :
( but
only cost of production )
AC
we know MC if wages the
-
are
-
real
wages ✗
provision
unemployment immigration 31
rate Childcare
P¥c
:
:
f =
=p _
% UP ↑ labour supply
unemployed? ↑ ↑ job loss
1- of
Who is classified unemployed cost
.
= = =
as
p
not in paid employment or self employment :
shifts ws curve ↓
-
-
_
.
↳
formal $ non formal
→
µ y Wy , .
,
Gini coefficient
Up inequality / equality
=
available for 1 1N output per real profit per
-
work .
→ worker -
=
worker .
↳ excludes students $ homemakers ↳ ↑ ^
=
a constant =
price setting curve gini coefficient unemployment rate
actively seeking work
-
=
dependent on markup 31 APL ↳
bargaining power ↓
population price setting curve : the real
wage paid when firms choose their
= ↑ Productivity =
↓ real wages -
↑ markup
cpop )
profit -
maximizing price .
↳ $ profit
1- +
relationship btwn
productivity
working youth $ depends
age elderly on :
•
competition which determines markup
population .
A
↓ markup
/
CWAP) ↓ competition
/§
=
"
real
1-
labour wages pushes down price setting curve
/ I
of
,
out ' ' >
,
force labour real
labour productivity which determines
wage
•
= , , ,
"
force for given mark-up
employed unemployed
" em '
discouraged
"m" Labour market equilibrium .
workers
lows Gini = Ut n -
( I -
U/ (Iq
labour market Statistics :
+ ☐w
U -
_
fraction of unemployed
labour force B
participation rate : ✗ 100 • D= fraction of employed
working age population ------------------ D
+ ☐w
—————-
C
—————————-
% =
real
wage / APL
Unemployment ✗ 100 A
——— A
unemployment rate : labour force + ☐w
Gini =
area of a + B
employment ' ◦°
labour unions
employment gives
✗
rate power to employers
: =
working age population
↳
"
wage bargaining
w →
nominal wage
D= equilibrium unemployment, C= overall unemployment, bargening power strong
wage setting curve
= union = ↑
peal wage
=
: ↑ ↑ ↓
P goods A= demand deficient unemployment wages ↓ profit
employees unemployment
:
.
=
price level of of
=
bundle consumer .
→
a
bargaining curve is always above wage setting
→
.
price setting $
wage setting .
↳
any '
point in the shaded '
region is tabled Voice effect =
give employees a voice =
more
as no work done >
cuz of insufficient "
① HR department sets the lowest it can to induce effort for same
wage ; xdisutility =
job value =L wage
wage (not feasible)
:
incentive
enough effort from workers
✗ is a hash equilibrium : PS =
Was
② Marketing department sets the price of the product labour market policies
:
:
.
all parties are
doing the best
they can
given
doing
"
is
what
everyone else :
Education $ labour
training productivity
◦ =
③ Production department decides :
how many workers the firms offering lowest wage
ensuring CAPL )
◦
firm needs workers effort
↓ firms
◦
Wage subsidy =
"
costs but constant
Employment
is the
highest it can be markup =L prices real wages
◦
=
wage setting curve the real wage necessary at each
:
given wage
level of wide
employment to provide workers
economy
-
◦ those who have jobs cannot improve
with incentive to work hard $ well
enough their situation ( ask 4 higher
pay / work less .
↳ relationship btwn & real hard
unemployment wages
µ /[ 9
constant markup
involuntary unemployment
•
labour
constant
average product of
•
§ higher unemployment
↳ no
9 0 the curve unemployment = zero cost
of job loss
in
employment movement along
=
=
no effort
→ cost
of job loss × motivates workers
a o in
employment rent =
a shift of the curve •
incomplete contracts
↑ in fall demand
unemployment due
to
↳ aka
something that changes effort levels @ all
wages
•
demand deficient
unemployment : a in
aggregate
>
insufficient government spending
output distribution :
in is
some unemployment economy necessary s
taxes are too
high
wage (Ip )
output / worker ( ADL) real profit ( markup) real Interest rates high
'
+ too
from
•
=
low demand moves us NE point
↳
aggregate × to B :
•
price =
Profit + nominal wage
Automatic adjustment firms wages ↓ costs ↑ output =
↑
employment at same effort
-
: =
v
output
Auto adj in practice
wages are sticky downwards
i. e. workers resist
wage cuts
↳ lower less
wages
=
consumption now
^ .
: AD falls further
wP=wⁿ
✓
Government intervention : restore
employmentw/o dropping wages .
Hark # •
monetary policy changing interest :
# ✓
rates or
decreasing the cost of money
in interest rates = more investment
.
profitable
-
are .
•
fiscal policy changes in : taxes or
↳ A Markup =
,
A
average product of labour government spending
=
profit
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