Macroeconomics is the study of the economy as a whole, including issues like economic growth, inflation, and unemployment. Economists use various models to examine different macroeconomic issues in both the short-run and long-run. Models with flexible prices describe the long-run, while models with sticky prices are used for the short-run. Macroeconomic outcomes emerge from individual microeconomic actions.
Macroeconomics is the study of the economy as a whole, including issues like growth, inflation, and unemployment. Economists use models to help explain and address these issues. Models make simplifying assumptions, like whether prices are flexible or sticky in the short-run. The chapter introduces concepts like endogenous and exogenous variables. It provides an example model of supply and demand for cars and how it can be used to analyze changes. The chapter outlines the topics that will be covered in the macroeconomics textbook, including classical theory, growth theory, and business cycle theory.
Macroeconomics is the study of the economy as a whole, including issues like growth, inflation, and unemployment. Economists use models to help explain and address these issues. Models make simplifying assumptions, like treating some variables as flexible or sticky. No single model can address all questions, so macroeconomics uses different models for different time periods and issues.
This chapter introduces macroeconomics and the tools used in macroeconomic analysis. It discusses important macroeconomic issues like unemployment, inflation, and recessions. Economists use models to study these issues; models simplify reality by stripping out irrelevant details. A model of supply and demand for cars is presented to illustrate how endogenous and exogenous variables work in a model. The chapter outlines the rest of the book and distinguishes between models that assume flexible prices, describing the long-run economy, versus sticky prices, describing the short-run.
This chapter introduces macroeconomics and the key issues it addresses such as economic growth, unemployment, inflation, and recessions. It discusses the tools macroeconomists use like economic models to study these issues and simplify complex realities. Models can have flexible or sticky prices to examine long-run or short-run economic behavior. The chapter provides an overview of the topics that will be covered in the book.
chap 1.Economic model and macro iindicators Mankiw.pptwaleedlink96
This chapter introduces macroeconomics and the key variables of GDP, inflation, and unemployment. The objective is to develop an analytical framework to explain trends in these variables and how government policies can affect them. Models are used to simplify complex economic relationships and analyze how changes in factors like income, prices, and supply/demand influence equilibrium outcomes. The chapter discusses the supply and demand model of the car market as an example and notes the importance of distinguishing endogenous and exogenous variables. It also introduces the concept of price flexibility versus stickiness and how this impacts the economy in the short versus long run.
chap 1.Economic model and macro iindicators Mankiw (1).pptmaaidahussain1
This chapter introduces macroeconomics and the goals of the course. It will develop an analytical framework to explain economic growth, unemployment, inflation, and how government policies can impact these factors. Important macroeconomic issues include why inflation and costs of living increase, why unemployment remains high even during economic recoveries, and what causes recessions and if governments can combat them. Models are used to simplify complex economic realities and show relationships between variables to explain economic behavior and develop policies. Key macroeconomic variables that will be examined are GDP, inflation rates, and unemployment rates.
Macroeconomics is the study of the economy as a whole, including growth, prices, and unemployment. Economists use models to understand different economic issues, with flexible price models describing the long run and sticky price models for the short run. This chapter introduced macroeconomics and economic models, explaining how models simplify reality to show relationships between variables and inform policies. It also outlined the topics to be covered in the book.
This document provides an overview and outline of macroeconomics topics covered in a textbook. It discusses the key issues macroeconomists study like recessions, inflation, and unemployment. It introduces economic models as simplified representations of reality used to study relationships between variables and devise policies. The document outlines different models used to examine short-run issues when prices are sticky versus long-run issues when prices are flexible. It concludes with a summary of macroeconomics as the study of the overall economy and growth.
Macroeconomics is the study of the economy as a whole, including issues like growth, inflation, and unemployment. Economists use models to help explain and address these issues. Models make simplifying assumptions, like whether prices are flexible or sticky in the short-run. The chapter introduces concepts like endogenous and exogenous variables. It provides an example model of supply and demand for cars and how it can be used to analyze changes. The chapter outlines the topics that will be covered in the macroeconomics textbook, including classical theory, growth theory, and business cycle theory.
Macroeconomics is the study of the economy as a whole, including issues like growth, inflation, and unemployment. Economists use models to help explain and address these issues. Models make simplifying assumptions, like treating some variables as flexible or sticky. No single model can address all questions, so macroeconomics uses different models for different time periods and issues.
This chapter introduces macroeconomics and the tools used in macroeconomic analysis. It discusses important macroeconomic issues like unemployment, inflation, and recessions. Economists use models to study these issues; models simplify reality by stripping out irrelevant details. A model of supply and demand for cars is presented to illustrate how endogenous and exogenous variables work in a model. The chapter outlines the rest of the book and distinguishes between models that assume flexible prices, describing the long-run economy, versus sticky prices, describing the short-run.
This chapter introduces macroeconomics and the key issues it addresses such as economic growth, unemployment, inflation, and recessions. It discusses the tools macroeconomists use like economic models to study these issues and simplify complex realities. Models can have flexible or sticky prices to examine long-run or short-run economic behavior. The chapter provides an overview of the topics that will be covered in the book.
chap 1.Economic model and macro iindicators Mankiw.pptwaleedlink96
This chapter introduces macroeconomics and the key variables of GDP, inflation, and unemployment. The objective is to develop an analytical framework to explain trends in these variables and how government policies can affect them. Models are used to simplify complex economic relationships and analyze how changes in factors like income, prices, and supply/demand influence equilibrium outcomes. The chapter discusses the supply and demand model of the car market as an example and notes the importance of distinguishing endogenous and exogenous variables. It also introduces the concept of price flexibility versus stickiness and how this impacts the economy in the short versus long run.
chap 1.Economic model and macro iindicators Mankiw (1).pptmaaidahussain1
This chapter introduces macroeconomics and the goals of the course. It will develop an analytical framework to explain economic growth, unemployment, inflation, and how government policies can impact these factors. Important macroeconomic issues include why inflation and costs of living increase, why unemployment remains high even during economic recoveries, and what causes recessions and if governments can combat them. Models are used to simplify complex economic realities and show relationships between variables to explain economic behavior and develop policies. Key macroeconomic variables that will be examined are GDP, inflation rates, and unemployment rates.
Macroeconomics is the study of the economy as a whole, including growth, prices, and unemployment. Economists use models to understand different economic issues, with flexible price models describing the long run and sticky price models for the short run. This chapter introduced macroeconomics and economic models, explaining how models simplify reality to show relationships between variables and inform policies. It also outlined the topics to be covered in the book.
This document provides an overview and outline of macroeconomics topics covered in a textbook. It discusses the key issues macroeconomists study like recessions, inflation, and unemployment. It introduces economic models as simplified representations of reality used to study relationships between variables and devise policies. The document outlines different models used to examine short-run issues when prices are sticky versus long-run issues when prices are flexible. It concludes with a summary of macroeconomics as the study of the overall economy and growth.
This chapter introduces macroeconomics and its key concepts. It discusses how macroeconomists study issues like economic growth, unemployment, and inflation at an aggregate level. The chapter also outlines the tools macroeconomists use, including economic models that simplify complex realities. It provides an example supply and demand model of the car market and discusses the distinction between endogenous and exogenous variables. The chapter concludes with an outline of the book's contents and a summary of macroeconomics as the study of the economy as a whole.
Macro economics, G.mankiw, 1-The Science of MacroeconomicsDr. Arifa Saeed
This document provides an introduction to macroeconomics. It discusses important issues studied in macroeconomics like inflation, unemployment, and economic growth. It also introduces some key tools used in macroeconomic analysis, including economic models. An example model of supply and demand for cars is presented to illustrate how macroeconomists use simplified models to show relationships between variables and explain economic behavior. The document emphasizes that different models are needed to study different macroeconomic issues.
This chapter introduces macroeconomics and the issues it addresses, such as economic growth, unemployment, and inflation. It discusses how macroeconomists use models to study these topics. Models make simplifying assumptions about factors like flexible vs. sticky prices to examine long-run versus short-run economic behavior. The chapter outlines the structure of the macroeconomics textbook in examining classical theory, growth theory, business cycles, and policy debates.
1. The chapter introduces macroeconomics and the tools used by macroeconomists to study issues like economic growth, unemployment, inflation, and the effects of government policies.
2. Macroeconomic models use simplified representations of the economy to show relationships between variables and explain economic behavior. Assumptions about price flexibility impact whether a model applies to short-run or long-run analysis.
3. Macroeconomics analyzes the whole economy and links microeconomic decisions of households and firms to macroeconomic outcomes. Different models address different issues over different time periods.
This document provides an overview of macroeconomics concepts from a textbook. It discusses what macroeconomists study, including issues like recessions, government spending, and inflation. It also covers the tools macroeconomists use, such as economic models, and key concepts around prices being flexible or sticky in the short and long run. The document outlines the chapters in the textbook, which cover classical economic theory, growth theory, business cycles, and macroeconomic policy.
This chapter introduces macroeconomics and the issues studied in the field. It discusses important macroeconomic concepts like GDP, unemployment, inflation, and recessions. The chapter explains that economists use different models to study different macroeconomic questions in both the short-run when prices are sticky and long-run when prices are flexible. It provides an example model of supply and demand for cars and how the model can be used to analyze the effects of changes in income and costs.
Macroeconomics is the study of the economy as a whole. Economists use models to examine issues like unemployment, inflation, and growth. Models simplify reality and show relationships between variables. Gross Domestic Product is a key statistic that measures total expenditure and income in the economy. It has components like consumption, investment, government spending, and net exports. Other important statistics include the Consumer Price Index for inflation and the unemployment rate.
Macroeconomics is the study of the economy as a whole. Economists use models to examine issues like unemployment, inflation, and growth. Models simplify reality and show relationships between variables. Gross domestic product is a key statistic that measures total expenditure and income in the economy. It has components like consumption, investment, government spending, and net exports. Other important statistics include inflation using the Consumer Price Index and the unemployment rate.
This course provides students with an understanding of macroeconomic analysis and application of microeconomic theory. The tentative course outline covers topics such as aggregate supply and demand, money supply and inflation, and unemployment. Students will complete a term paper and presentation analyzing a macroeconomic issue. Assessment includes exams, assignments, and the paper/presentation.
This chapter introduces macroeconomics and the tools used by macroeconomists. It discusses important macroeconomic issues like economic growth, unemployment, inflation, and recessions. Macroeconomists study indicators like GDP, inflation, and unemployment rates. The chapter outlines the structure of the book, which will cover classical economic theory, growth theory, and business cycle theory. It explains that macroeconomists use models to examine different issues and that these models vary in their treatment of price flexibility.
This document introduces macroeconomics and the tools used by macroeconomists. It discusses important macroeconomic issues like GDP, inflation, unemployment and recessions. It explains that macroeconomists use simplified models to study relationships between economic variables and to explain overall economic behavior. Models can have flexible or sticky prices, affecting how the economy functions in the short and long run. The goal of macroeconomics is to understand and improve the overall economy.
This document provides an overview and introduction to the scope and method of economics. It discusses the following key points in 3 sentences:
Economics is the study of how individuals and societies make choices with scarce resources. The document outlines why economics is studied, including to learn a way of thinking, understand society and global affairs, and be an informed voter. It also describes the scope of economics in terms of microeconomics, macroeconomics, and diverse fields, as well as the method which involves theories, models, and empirical testing of economic concepts.
This document provides an overview and introduction to economics. It discusses the scope of economics, including microeconomics and macroeconomics. It also covers the reasons to study economics, such as to learn a way of thinking and to understand society and global affairs. Additionally, it summarizes the method of economics, including theories, models, and empirical testing. Economic policy goals like efficiency, equity, growth and stability are also briefly outlined.
This document provides an acknowledgements section for the author Mannig J. Simidian and an introduction to the topics that will be covered in the macroeconomics textbook and course. It thanks various individuals who influenced the author and provided guidance. It also outlines some of the key macroeconomic concepts that will be discussed, including real GDP, inflation, unemployment, models, endogenous and exogenous variables, market clearing, and the relationship between microeconomics and macroeconomics.
Macroeconomics examines economies at a large scale by studying aggregate variables such as output, inflation, and unemployment. It analyzes differences between the micro and macro levels. Economists use models to understand relationships between endogenous and exogenous variables in both the short-run, where prices are sticky, and long-run, where prices are flexible and technology evolves.
This document summarizes the key differences between microeconomics and macroeconomics. Microeconomics examines individual markets and consumer behavior, while macroeconomics looks at aggregate variables for the whole economy. Specifically, microeconomics is concerned with supply and demand in individual markets, while macroeconomics focuses on monetary/fiscal policy and economic growth at the national level. A key difference is that microeconomics assumes markets will quickly reach equilibrium, but macroeconomics recognizes economies may remain in disequilibrium like during recessions.
Here are the steps to calculate the opportunity cost:
1. Calculate the difference in production between the two goods.
From A to B, chairs decreased by 5 while TVs increased by 5.
2. Write this as a sentence:
The opportunity cost of 5 more TVs is 5 fewer chairs.
3. Divide to find the opportunity cost of 1 unit:
The opportunity cost of 1 more TV is 1 fewer chair.
Or the opportunity cost of 1 fewer chair is 1 more TV.
Solution Manual for Microeconomics, 17th edition by Christopher T.S. Ragan C...mwangimwangi222
Solution Manual for Microeconomics, 17th edition by Christopher T.S. Ragan Complete Verified Chapter's.docx
Solution Manual for Microeconomics, 17th edition by Christopher T.S. Ragan Complete Verified Chapter's.docx
Solution Manual for Microeconomics, 17th edition by Christopher T.S. Ragan Complete Verified Chapter's.docx
Solution Manual for Microeconomics, 17th edition by Christopher T.S. Ragan C...Donc Test
Solution Manual for Microeconomics, 17th edition by Christopher T.S. Ragan Complete Verified Chapter's.docx
Solution Manual for Microeconomics, 17th edition by Christopher T.S. Ragan Complete Verified Chapter's.docx
Heather Elizabeth HamoodHeather Elizabeth Hamoodheatherhamood
Heather Hamood is a Licensed Physician who enjoys playing the Violin in her spare time. In addition to helping people as a Doctor, she loves to share her passion for the violin.
This chapter introduces macroeconomics and its key concepts. It discusses how macroeconomists study issues like economic growth, unemployment, and inflation at an aggregate level. The chapter also outlines the tools macroeconomists use, including economic models that simplify complex realities. It provides an example supply and demand model of the car market and discusses the distinction between endogenous and exogenous variables. The chapter concludes with an outline of the book's contents and a summary of macroeconomics as the study of the economy as a whole.
Macro economics, G.mankiw, 1-The Science of MacroeconomicsDr. Arifa Saeed
This document provides an introduction to macroeconomics. It discusses important issues studied in macroeconomics like inflation, unemployment, and economic growth. It also introduces some key tools used in macroeconomic analysis, including economic models. An example model of supply and demand for cars is presented to illustrate how macroeconomists use simplified models to show relationships between variables and explain economic behavior. The document emphasizes that different models are needed to study different macroeconomic issues.
This chapter introduces macroeconomics and the issues it addresses, such as economic growth, unemployment, and inflation. It discusses how macroeconomists use models to study these topics. Models make simplifying assumptions about factors like flexible vs. sticky prices to examine long-run versus short-run economic behavior. The chapter outlines the structure of the macroeconomics textbook in examining classical theory, growth theory, business cycles, and policy debates.
1. The chapter introduces macroeconomics and the tools used by macroeconomists to study issues like economic growth, unemployment, inflation, and the effects of government policies.
2. Macroeconomic models use simplified representations of the economy to show relationships between variables and explain economic behavior. Assumptions about price flexibility impact whether a model applies to short-run or long-run analysis.
3. Macroeconomics analyzes the whole economy and links microeconomic decisions of households and firms to macroeconomic outcomes. Different models address different issues over different time periods.
This document provides an overview of macroeconomics concepts from a textbook. It discusses what macroeconomists study, including issues like recessions, government spending, and inflation. It also covers the tools macroeconomists use, such as economic models, and key concepts around prices being flexible or sticky in the short and long run. The document outlines the chapters in the textbook, which cover classical economic theory, growth theory, business cycles, and macroeconomic policy.
This chapter introduces macroeconomics and the issues studied in the field. It discusses important macroeconomic concepts like GDP, unemployment, inflation, and recessions. The chapter explains that economists use different models to study different macroeconomic questions in both the short-run when prices are sticky and long-run when prices are flexible. It provides an example model of supply and demand for cars and how the model can be used to analyze the effects of changes in income and costs.
Macroeconomics is the study of the economy as a whole. Economists use models to examine issues like unemployment, inflation, and growth. Models simplify reality and show relationships between variables. Gross Domestic Product is a key statistic that measures total expenditure and income in the economy. It has components like consumption, investment, government spending, and net exports. Other important statistics include the Consumer Price Index for inflation and the unemployment rate.
Macroeconomics is the study of the economy as a whole. Economists use models to examine issues like unemployment, inflation, and growth. Models simplify reality and show relationships between variables. Gross domestic product is a key statistic that measures total expenditure and income in the economy. It has components like consumption, investment, government spending, and net exports. Other important statistics include inflation using the Consumer Price Index and the unemployment rate.
This course provides students with an understanding of macroeconomic analysis and application of microeconomic theory. The tentative course outline covers topics such as aggregate supply and demand, money supply and inflation, and unemployment. Students will complete a term paper and presentation analyzing a macroeconomic issue. Assessment includes exams, assignments, and the paper/presentation.
This chapter introduces macroeconomics and the tools used by macroeconomists. It discusses important macroeconomic issues like economic growth, unemployment, inflation, and recessions. Macroeconomists study indicators like GDP, inflation, and unemployment rates. The chapter outlines the structure of the book, which will cover classical economic theory, growth theory, and business cycle theory. It explains that macroeconomists use models to examine different issues and that these models vary in their treatment of price flexibility.
This document introduces macroeconomics and the tools used by macroeconomists. It discusses important macroeconomic issues like GDP, inflation, unemployment and recessions. It explains that macroeconomists use simplified models to study relationships between economic variables and to explain overall economic behavior. Models can have flexible or sticky prices, affecting how the economy functions in the short and long run. The goal of macroeconomics is to understand and improve the overall economy.
This document provides an overview and introduction to the scope and method of economics. It discusses the following key points in 3 sentences:
Economics is the study of how individuals and societies make choices with scarce resources. The document outlines why economics is studied, including to learn a way of thinking, understand society and global affairs, and be an informed voter. It also describes the scope of economics in terms of microeconomics, macroeconomics, and diverse fields, as well as the method which involves theories, models, and empirical testing of economic concepts.
This document provides an overview and introduction to economics. It discusses the scope of economics, including microeconomics and macroeconomics. It also covers the reasons to study economics, such as to learn a way of thinking and to understand society and global affairs. Additionally, it summarizes the method of economics, including theories, models, and empirical testing. Economic policy goals like efficiency, equity, growth and stability are also briefly outlined.
This document provides an acknowledgements section for the author Mannig J. Simidian and an introduction to the topics that will be covered in the macroeconomics textbook and course. It thanks various individuals who influenced the author and provided guidance. It also outlines some of the key macroeconomic concepts that will be discussed, including real GDP, inflation, unemployment, models, endogenous and exogenous variables, market clearing, and the relationship between microeconomics and macroeconomics.
Macroeconomics examines economies at a large scale by studying aggregate variables such as output, inflation, and unemployment. It analyzes differences between the micro and macro levels. Economists use models to understand relationships between endogenous and exogenous variables in both the short-run, where prices are sticky, and long-run, where prices are flexible and technology evolves.
This document summarizes the key differences between microeconomics and macroeconomics. Microeconomics examines individual markets and consumer behavior, while macroeconomics looks at aggregate variables for the whole economy. Specifically, microeconomics is concerned with supply and demand in individual markets, while macroeconomics focuses on monetary/fiscal policy and economic growth at the national level. A key difference is that microeconomics assumes markets will quickly reach equilibrium, but macroeconomics recognizes economies may remain in disequilibrium like during recessions.
Here are the steps to calculate the opportunity cost:
1. Calculate the difference in production between the two goods.
From A to B, chairs decreased by 5 while TVs increased by 5.
2. Write this as a sentence:
The opportunity cost of 5 more TVs is 5 fewer chairs.
3. Divide to find the opportunity cost of 1 unit:
The opportunity cost of 1 more TV is 1 fewer chair.
Or the opportunity cost of 1 fewer chair is 1 more TV.
Solution Manual for Microeconomics, 17th edition by Christopher T.S. Ragan C...mwangimwangi222
Solution Manual for Microeconomics, 17th edition by Christopher T.S. Ragan Complete Verified Chapter's.docx
Solution Manual for Microeconomics, 17th edition by Christopher T.S. Ragan Complete Verified Chapter's.docx
Solution Manual for Microeconomics, 17th edition by Christopher T.S. Ragan Complete Verified Chapter's.docx
Solution Manual for Microeconomics, 17th edition by Christopher T.S. Ragan C...Donc Test
Solution Manual for Microeconomics, 17th edition by Christopher T.S. Ragan Complete Verified Chapter's.docx
Solution Manual for Microeconomics, 17th edition by Christopher T.S. Ragan Complete Verified Chapter's.docx
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2. CHAPTER 1 The Science of Macroeconomics slide 2
Learning Objectives
This chapter introduces you to
the issues macroeconomists study
the tools macroeconomists use
some important concepts in macroeconomic
analysis
3. CHAPTER 1 The Science of Macroeconomics slide 3
Important issues in
macroeconomics
Why does the cost of living keep rising?
Why are millions of people unemployed,
even when the economy is booming?
What causes recessions?
Can the government do anything to combat
recessions? Should it?
Macroeconomics, the study of the economy as
a whole, addresses many topical issues:
4. CHAPTER 1 The Science of Macroeconomics slide 4
Important issues in
macroeconomics
What is the government budget deficit?
How does it affect the economy?
Why does the U.S. have such a huge trade
deficit?
Why are so many countries poor?
What policies might help them grow out of
poverty?
Macroeconomics, the study of the economy as
a whole, addresses many topical issues:
5. CHAPTER 1 The Science of Macroeconomics slide 5
0
10,000
20,000
30,000
40,000
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
U.S. Real GDP per capita
(2000 dollars)
Great
Depression
World War II
First oil
price shock
Second oil
price shock
long-run upward trend…
9/11/2001
6. CHAPTER 1 The Science of Macroeconomics slide 6
U.S. inflation rate
(% per year)
-15
-10
-5
0
5
10
15
20
25
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
7. CHAPTER 1 The Science of Macroeconomics slide 7
U.S. unemployment rate
(% of labor force)
0
5
10
15
20
25
30
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
8. CHAPTER 1 The Science of Macroeconomics slide 8
Why learn macroeconomics?
1. The macroeconomy affects society’s well-being.
Each one-point increase in the unemployment rate
is associated with:
920 more suicides
650 more homicides
4000 more people admitted to state mental
institutions
3300 more people sent to state prisons
37,000 more deaths
increases in domestic violence and homelessness
Each one-point increase in the unemployment rate
is associated with:
920 more suicides
650 more homicides
4000 more people admitted to state mental
institutions
3300 more people sent to state prisons
37,000 more deaths
increases in domestic violence and homelessness
9. CHAPTER 1 The Science of Macroeconomics slide 9
Why learn macroeconomics?
2. The macroeconomy affects your well-being.
change
from
12
mos
earlier
percent
change
from
12
mos
earlier
In most years, wage growth falls
when unemployment is rising.
In most years, wage growth falls
when unemployment is rising.
10. CHAPTER 1 The Science of Macroeconomics slide 10
Why learn macroeconomics?
Unemployment & inflation in election years
year U rate inflation rate elec. outcome
1976 7.7% 5.8% Carter (D)
1980 7.1% 13.5% Reagan (R)
1984 7.5% 4.3% Reagan (R)
1988 5.5% 4.1% Bush I (R)
1992 7.5% 3.0% Clinton (D)
1996 5.4% 3.3% Clinton (D)
2000 4.0% 3.4% Bush II (R)
2004 5.5% 3.3% Bush II (R)
3. The macroeconomy affects politics.
11. CHAPTER 1 The Science of Macroeconomics slide 11
Economic models
…are simplified versions of a more complex reality
irrelevant details are stripped away
…are used to
show relationships between variables
explain the economy’s behavior
devise policies to improve economic
performance
12. CHAPTER 1 The Science of Macroeconomics slide 12
Example of a model:
Supply & demand for new cars
shows how various events affect price and
quantity of cars
assumes the market is competitive: each buyer
and seller is too small to affect the market price
Variables:
Q d
= quantity of cars that buyers demand
Q s
= quantity that producers supply
P = price of new cars
Y = aggregate income
Ps = price of steel (an input)
13. CHAPTER 1 The Science of Macroeconomics slide 13
The demand for cars
demand equation: Q d
= D (P,Y )
shows that the quantity of cars consumers
demand is related to the price of cars and
aggregate income
14. CHAPTER 1 The Science of Macroeconomics slide 14
Digression: functional notation
General functional notation
shows only that the variables are related.
Q d
= D (P,Y )
A specific functional form shows
the precise quantitative relationship.
Example:
D (P,Y ) = 60 – 10P + 2Y
A list of the
variables
that affect Q d
15. CHAPTER 1 The Science of Macroeconomics slide 15
The market for cars: Demand
Q
Quantity
of cars
P
Price
of cars
D
The demand curve
shows the relationship
between quantity
demanded and price,
other things equal.
demand equation:
( , )
=
d
Q D P Y
16. CHAPTER 1 The Science of Macroeconomics slide 16
The market for cars: Supply
Q
Quantity
of cars
P
Price
of cars
D
supply equation:
( , )
=
s
s
Q S P P S
The supply curve
shows the relationship
between quantity
supplied and price,
other things equal.
17. CHAPTER 1 The Science of Macroeconomics slide 17
The market for cars: Equilibrium
Q
Quantity
of cars
P
Price
of cars S
D
equilibrium
price
equilibrium
quantity
18. CHAPTER 1 The Science of Macroeconomics slide 18
The effects of an increase in income
Q
Quantity
of cars
P
Price
of cars S
D1
Q1
P1
An increase in income
increases the quantity
of cars consumers
demand at each price…
…which increases
the equilibrium price
and quantity.
P2
Q2
demand equation:
( , )
=
d
Q D P Y
D2
19. CHAPTER 1 The Science of Macroeconomics slide 19
The effects of a steel price increase
Q
Quantity
of cars
P
Price
of cars S1
D
Q1
P1
An increase in Ps
reduces the quantity of
cars producers supply
at each price…
…which increases the
market price and
reduces the quantity.
P2
Q2
S2
supply equation:
( , )
=
s
s
Q S P P
20. CHAPTER 1 The Science of Macroeconomics slide 20
Endogenous vs. exogenous
variables
The values of endogenous variables
are determined in the model.
The values of exogenous variables
are determined outside the model:
the model takes their values & behavior
as given.
In the model of supply & demand for cars,
endogenous: , ,
d s
P Q Q
exogenous: , s
Y P
21. CHAPTER 1 The Science of Macroeconomics slide 21
Now you try:
1. Write down demand and supply
equations for wireless phones;
include two exogenous variables
in each equation.
2. Draw a supply-demand graph
for wireless phones.
3. Use your graph to show how a
change in one of your exogenous
variables affects the model’s
endogenous variables.
22. CHAPTER 1 The Science of Macroeconomics slide 22
A multitude of models
No one model can address all the issues we
care about.
e.g., our supply-demand model of the car
market…
can tell us how a fall in aggregate income
affects price & quantity of cars.
cannot tell us why aggregate income falls.
23. CHAPTER 1 The Science of Macroeconomics slide 23
A multitude of models
So we will learn different models for studying
different issues (e.g., unemployment, inflation,
long-run growth).
For each new model, you should keep track of
its assumptions
which variables are endogenous,
which are exogenous
the questions it can help us understand,
and those it cannot
24. CHAPTER 1 The Science of Macroeconomics slide 24
Prices: flexible vs. sticky
Market clearing: An assumption that prices are
flexible, adjust to equate supply and demand.
In the short run, many prices are sticky –
adjust sluggishly in response to changes in
supply or demand. For example,
many labor contracts fix the nominal wage
for a year or longer
many magazine publishers change prices
only once every 3-4 years
25. CHAPTER 1 The Science of Macroeconomics slide 25
Prices: flexible vs. sticky
The economy’s behavior depends partly on
whether prices are sticky or flexible:
If prices are sticky, then demand won’t always
equal supply. This helps explain
unemployment (excess supply of labor)
why firms cannot always sell all the goods
they produce
Long run: prices flexible, markets clear,
economy behaves very differently
26. CHAPTER 1 The Science of Macroeconomics slide 26
Outline of this book:
Introductory material (Chaps. 1 & 2)
Classical Theory (Chaps. 3-6)
How the economy works in the long run, when
prices are flexible
Growth Theory (Chaps. 7-8)
The standard of living and its growth rate over the
very long run
Business Cycle Theory (Chaps. 9-13)
How the economy works in the short run, when
prices are sticky
27. CHAPTER 1 The Science of Macroeconomics slide 27
Outline of this book:
Policy debates (Chaps. 14-15)
Should the government try to smooth business
cycle fluctuations? Is the government’s debt a
problem?
Microeconomic foundations (Chaps. 16-19)
Insights from looking at the behavior of
consumers, firms, and other issues from a
microeconomic perspective
28. Chapter Summary
Chapter Summary
Macroeconomics is the study of the economy as
a whole, including
growth in incomes,
changes in the overall level of prices,
the unemployment rate.
Macroeconomists attempt to explain the
economy and to devise policies to improve its
performance.
CHAPTER 1 The Science of Macroeconomics slide 28
29. Chapter Summary
Chapter Summary
Economists use different models to examine
different issues.
Models with flexible prices describe the economy
in the long run; models with sticky prices
describe the economy in the short run.
Macroeconomic events and performance arise
from many microeconomic transactions, so
macroeconomics uses many of the tools of
microeconomics.
CHAPTER 1 The Science of Macroeconomics slide 29