100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
Class notes Intermediate Macroeconomic Theory and Policy (ECON305) $9.99   Add to cart

Class notes

Class notes Intermediate Macroeconomic Theory and Policy (ECON305)

 4 views  0 purchase

Course notes for intermediate macroeconomics. Course description: Analysis of the determination of national income, employment, and price levels. Discussion of consumption, investment, inflation, and government fiscal and monetary policy.

Preview 3 out of 21  pages

  • August 14, 2024
  • 21
  • 2022/2023
  • Class notes
  • Copelman
  • All classes
All documents for this subject (1)
avatar-seller
phyliciachilds
CH 2a
● GDP = ∑P ∗ Q
○ All final goods produced in an economy
● Value added
○ GDP(va) = GDP(final) = GDP(income)
○ GDP(va) = gross revenue - intermediate costs
● Income side
○ GDP(Y) = ∑incomes of all factors of production = income to labor + income k +
dividends or profits
○ GDP(Y) = (W ∗ L) + (r ∗ k) + profits
■ Where (W ∗ L=labor income) and (r ∗ k=k’s income)

CH 2b
● Level of a Variable = a # which depends on the quantity of that #
○ e.g. the level of income at time t = the level of GDP at time t
● Pt = level of the Price Index at t
● Growth Rates
○ % Δ in the level of a variable between 2 periods of time

9/1/2022
● Potential GDP (Yn) = Level of GDP produced when all factors of production are at full
employment, that is u = the natural rate of unemployment. Also known as Natural
Output, Full Employment Output
● Nominal GDP = Sum of P ∗ Q (current prices and quantities)
● Real GDP = Sum of P0 ∗ Q (base year prices)
● Labor force (L): sum of employment (N) and unemployment (U)
○ L=N+U
○ N = number of people who are employed
○ U = number of people who don’t have a job and are looking for one
𝑈
● Unemployment rate (u): ut =
𝐿
● Natural rate of unemployment (un): the rate of unemployment at full employment for
natural output. Composed of frictional and structural unemployment. un > 0
● Cyclical unemployment: Unemployment that varies within the business cycle. Increases
during recessions and deacreases during expansions.
● Price Index (P): weighted average price of a basket of goods and services
𝑁𝑜𝑚𝑖𝑛𝑎𝑙 𝐺𝐷𝑃 𝑡
○ GDP deflator (P): Pt =
𝑅𝑒𝑎𝑙 𝐺𝐷𝑃 𝑡
𝑃 𝑡
∗𝑄 0
○ CPI (P): Pt = Σ𝑖, 𝑡 for all goods i
𝑃 0
∗𝑄 0


9/6/2022
● Okun’s Law

, ○ Negative relationship between output growth and unemployment
● Philips Curve
○ Negative relationship between inflation and unemployment
● Short run
○ Year to year fluctuations, in output are mostly driven by changes in demand.
Prices fixed, unemployment rate varies
● Medium run
○ Decade
○ Economy tends to return to the natural rate of output (potential GDP) deternined
by supply factors, such as K stock, technology level, and size of labor force. P
flexible, un
● Long run
○ Several decades or longer
○ Economy depends on technologic progress and innovation, level of savings,
quality of education system and government, and other institutions
● The Goods Market
○ Focus on interactions among production, income, and demand
○ Z = C + I + G + NX
○ 𝑍 = 𝐶 + 𝐼 + 𝐺 + 𝑁𝑋
○ Z = total demand for all goods
● Consumption function
○ Describes the relationship between C and disposable income (YD). A behavioral
equation
○ C = C0 + c1(YD)
○ YD = Y - Tbar + (Tg)bar
○ c1 is the propensity to consume, 0<c1<1
○ C0 is what people would consume if their disposable income equals zero
○ Changes in C0 reflect changes in consumption for a given level of disposable
income
● Endogenous variables
○ Variables that depend on other variables in the model. That is, they are
determined within the model
● Exogenous variables
○ Variables not explained within the model but are instead taken as given or fixed
at a point in time. Denote them by a bar over them
● Equilibrium in goods markets
○ Y=Z
○ Y = (1/(1-c1))(C0 + Ibar + Gbar + c1Tbar + c1(Tg)bar)
● Autonomous spending
○ Spending independent of Y or i
○ Abar = C0 + Ibar + Gbar + c1Tbar + c1(Tg)bar
■ Abar > 0
● The Keynesian Multiplier
○ The simple multiplier

, ■ β = 1/(1-c1)
■ β>1
■ β is a positive function of c1
■ β represents the waves of consumption that amplify a change in A


9/8/2022
● The Keynesian Cross
○ ZZ = Z = Abar +c1(Y)
○ Y = Z = (1/(1-c1))(C0 + Ibar + Gbar + c1Tbar + c1(Tg)bar)
○ Y = β*Abar
● Changes in Abar can be due to Fiscal policy or sentiments
● Fiscal Policy: used by the government to change the level of output (Y). Implemented
by changing G, T, or Tg
○ Expansionary FP: Increases Y at every level of P and i rates (up G, up Tg, or
down T)
○ Contractionary FP: Decreases Y at every level of P and i rates (down G, down Tg,
or up T)
○ Only affects Goods Markets
○ Exogenous variables taken as given
● Sentiments
○ Changes in C0 or Ibar that are due to optimism or pessimism about the future even
if current disposable income has not changed
○ Increase in C0 or Ibar → increase in Abar
○ Decrease in C0 or Ibar → decrease in Abar
● Increase in weath can cause an increase in C0
● Private Savings (S)
○ S = YD - C
○ S = (Y - T + Tg) - C
● Public Savings (Sg)
○ Sg = T - (G + Tg)
○ Sg > 0 → Budget Surplus
○ Sg < 0 → Budget Deficit
● National or Domestic Savings: S + Sg
● Investment = Savings

CH2 HW notes
● Q1 - During a given​year, the following activities occur in two​stages:
i. A silver mining company pays its workers ​$200,000 to mine 75 pounds of silver.
The silver is then sold to a jewelry manufacturer for ​$300,000.
ii. The jewelry manufacturer pays its workers ​$250,000 to make silver​necklaces,
which the manufacturer sells directly to customers for ​$1,000,000.

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

Quick and easy check-out

You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying these notes from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller phyliciachilds. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for $9.99. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

62491 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy study notes for 14 years now

Start selling
$9.99
  • (0)
  Add to cart