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ECS2602-Macroeconomics II Latest Study Guide 2022. £2.55   Add to cart

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ECS2602-Macroeconomics II Latest Study Guide 2022.

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ECS2602-Macroeconomics II Latest Study Guide 2022. Macroeconomics deals with the economy as a whole and not the behaviour and decisions of individual consumers, households and firms, as in microeconomics. Furthermore, macroeconomics involves determining and exploring the relationship between aggr...

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  • August 8, 2022
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  • 2022/2023
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Study Guide
Macroeconomics II

, iii ECS2602/1/2012-2014

CONTENTS
Page


HOW TO STUDY MACROECONOMICS AND USE THIS STUDY GUIDE

The focus of the module .......................................................................................................... 1
The function of the study guide ............................................................................................... 2
How to use the study guide ..................................................................................................... 3
Checklist in the workbook ........................................................................................................ 4
How to study ........................................................................................................................... 5



STUDY UNIT 1

AN OVERVIEW OF THE SOUTH AFRICAN MACROECONOMIC
ENVIRONMENT ..................................................................................................................... 6

1-1 The difference between microeconomics and macroeconomics ................................... 6
1-2 Economic growth ........................................................................................................... 7
1-3 The South African business cycle ................................................................................ 10
1-4 Stabilisation policy ....................................................................................................... 11
1-5 Inflation ........................................................................................................................ 12
1-6 Unemployment .............................................................................................................. 13
1-7 Balance of payments .................................................................................................... 16
1-8 Distribution of income ................................................................................................... 17


STUDY UNIT 2

THE GOODS MARKET ........................................................................................................ 19

2-1 The composition of GDP .............................................................................................. 19
2-2 The demand for goods ................................................................................................. 24
2-3 The determination of the equilibrium output ................................................................ 36



STUDY UNIT 3

FINANCIAL MARKETS ........................................................................................................ 57

3-1 The demand for money ................................................................................................. 57
3-2 Determining the interest rate (i) .................................................................................... 60

, iv

STUDY UNIT 4

GOODS AND FINANCIAL MARKETS: THE IS-LM MODEL .............................................. 71

4-1 The goods market and the IS relation .......................................................................... 71
4-2 Financial markets and the LM relation ......................................................................... 82
4-3 Putting the IS and LM relations together ..................................................................... 86
4-4 Using a policy mix ........................................................................................................ 96
4-5 Comparing fiscal policy with monetary policy ............................................................... 97
4-6 Comparing fiscal policy in the goods market and the IS-LM model .............................. 98



STUDY UNIT 5

OPENNESS IN GOODS AND FINANCIAL MARKETS ....................................................... 99

5-1 Openness in the goods markets ................................................................................. 100
5-2 Openness in the financial markets .............................................................................. 104



STUDY UNIT 6

THE GOODS MARKET IN AN OPEN ECONOMY ............................................................. 110

6-1 The IS-relation in an open economy .......................................................................... 111
6-2 Equilibrium output and the trade balance .................................................................. 117
6-3 Increases in demand, domestic or foreign ................................................................. 119
6-4 Depreciation, the trade balance and output ............................................................... 122



STUDY UNIT 7

OUTPUT, THE INTEREST RATE AND THE EXCHANGE RATE:
THE IS-LM MODEL FOR AN OPEN ECONOMY ............................................................... 125

7-1 Equilibrium in the goods market ................................................................................ 126
7-2 Equilibrium in financial markets ................................................................................. 127
7-3 Putting goods and financial markets together ............................................................ 130
7-4 The effects of policy in an open economy ................................................................. 132
7-5 Comparing the impact of fiscal and monetary policy .................................................. 137

, v ECS2602/1

STUDY UNIT 8

THE LABOUR MARKET .................................................................................................... 140

8-1 A tour of the labour market ........................................................................................ 140
8-2 Movements in unemployment and the position of workers ........................................ 142
8-3 Wage determination ................................................................................................... 142
8-4 Price determination ..................................................................................................... 146
8-5 The natural rate of unemployment ............................................................................. 148



STUDY UNIT 9

The AS-AD MODEL ........................................................................................................... 158

9-1 Aggregate supply ....................................................................................................... 159
9-2 Aggregate demand .................................................................................................... 163
9-3 Equilibrium in the short and medium run ................................................................... 168
9-4 The effects of a monetary expansion ......................................................................... 171
9-5 A decrease in the budget deficit ................................................................................ 175
9-6 Changes in the price of oil ......................................................................................... 178

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