Slide lecture Macroeconomic II Introduction

5EN453, 2 Lectures (6 ECTS) Lecturer: Pavel Potužák, Dpt. of Economics Office hours: Thursday 13:15-15:15, NB343 Website: http://keke.vse.cz/studium/materialy/5en453-macroeconomics-ii/ Textbook: David Romer (2006): Advanced Macroeconomics, 3rd edition (or higher) Download: kekebooks.vse.cz (psw: keke123) Barro: Macroeconomics (1997,2008) (Optional)

Macro II

Introduction

Course information

• 5EN453, 2 Lectures (6 ECTS)

• Lecturer: Pavel Potužák, Dpt of Economics

• Office hours: Thursday 13:15-15:15, NB343

• Website:

http://keke.vse.cz/studium/materialy/5en45 3-macroeconomics-ii/

Course information

• Textbook: David Romer (2006): Advanced

Macroeconomics, 3rd edition (or higher)

• Download: kekebooks.vse.cz (psw: keke123)

• Barro: Macroeconomics (1997,2008) (Optional)

 It covers 1st part of the semester (Solow,

Ramsey)

 40 Points for Final test in the Exam period:

 It covers 2nd part of the semester (from

Diamond to NKE).

 20 points for 5 Problem sets (HW).Each for 4

p

The Science of Macroeconomics

• Master-economist must possess a rare combination of gifts He

must be mathematician, historian, statesman, philosopher

—in some degree. He must understand symbols and speak in

words He must contemplate the particular in terms of the general and touch abstract and concrete in the same flight of thought He must study the present in the light of the past for the purposes

of the future. No part of man’s nature of his institutions must lie

entirely outside his regard He must be purposeful and

disinterested in a simultaneous mood; as aloof and

incorruptible as an artist, yet sometimes as near to earth

The Science of Macroeconomics

• Macroeconomics, the study of the economy as a whole, attempts to answer questions like:

 Why have some countries experienced rapid growth in incomes while others stagnated in poverty?

 Why do some countries have high rates of inflation while others maintain stable prices?

 Why do all countries experience recessions and

depressions and (how) can (and should?) government policy reduce the frequency and severity of these

episodes?

World War II

First oil price shock

Second oil price shock

long-run upward trend…

9/11/2001

Growth rates of real GDP, U.S

-4 -2 0 2 4 6 8 10

1970 1975 1980 1985 1990 1995 2000 2005

Real GDP growth rate

Average

growth

rate

12

CR vs EU

GDP per head, EU27 = 100

15

Kaldor's stylized facts

-The rate of growth of output per worker is roughly constant over long periods of time, and its growth

rate does not seem to diminish The shares of national income received by labor and

capital are roughly constant over long periods of

time -The rate of growth of the capital stock is roughly

constant over long periods of time -The capital/output ratio is roughly constant over long

periods of time -The rate of return on investment is roughly constant

over long periods of time -The real wage grows over time

The ratio of labor income to total

income in the U.S.

Labor’s

share

of total

income

Labor’s share of income

is approximately constant over time.(Hence, capital’s share is, too.)

Labor’s share of income

is approximately constant over time.(Hence, capital’s share is, too.)

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