Lecture macroeconomics chapter 1 introduction to macroeconomic policy issues and data

Institute of International Education SYLLABUS❑Course objectives: Students are aimed to a understand how to evaluate macroeconomic conditions such as unemployment, inflation, and growth b

Lecturer: MSc Nguyen Thuy Dung

www.hutech.edu.vn/quocte

Institute of International Education SYLLABUS

❑Course objectives: Students are aimed to

(a) understand how to evaluate macroeconomic

conditions such as unemployment, inflation, and growth

(b) understand how monetary policy and fiscal

policy can be used to influence short-run macroeconomic conditions

(c) understand media accounts of

macroeconomic events

SYLLABUS

❑Student tasks:

▪Class attendance:

▪Actively participate in-class activity

▪Complete all homework (if any) and other tasks

▪Don’t have private conversation or arrive at class late

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Institute of International Education COURSE GRADE

COURSE GRADE

▪Mid term test: 30% including multiple choice

and short-answer questions, individual.

▪Final exam: 70%

- Final Examination Mode: Essay

- Duration: 90 minutes

- Students are NOT allowed to use materials

BOOKS & READINGS

BOOKS AND READING

▪Mankiw, N G., (2015) Principles of Economics

– 7th edition, CENGAGE Learning

▪Mankiw, N G., (2009) Macroeconomics – 7th

edition

▪Lecturer’s contact:

Email: nguyendung3691@gmail.com

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Institute of International Education BOOKS & READINGS

FYI: HOW TO READ YOUR TEXTBOOK

1 Read before class.

2 Summarize, don’t highlight.

3 Test yourself.

Try “Quick Quiz” that follows each section

4 Do not skip real world examples.

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In microeconomics, households choose their purchases

to maximize their level of satisfaction, “their utility”,

and firms make production decisions to maximize their profits

Macroeconomic events arise from the interaction of many

households and firms Therefore, when we study macroeconomics, we must consider microeconomic foundations.

Institute of International Education CONTENTS

01

INTRODUCTION TO

MACROECONOMIC

POLICY ISSUES AND

DATA

02

MACROECONOMIC

IN THE LONG-RUN

03

MONEY AND PRICES

IN THE LONG-RUN

04

OPEN ECONOMIES

05

SHORT-RUN ECONOMIC FLUCTUATIONS

TOPIC CONTENTS

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1.1

1.2

The science of Macroeconomics

The data of Macroeconomics

INTRODUCTION TO MACROECONOMIC POLICY ISSUES

AND DATA

Topics to be discussed

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This section introduces you to:

▪ the issues macroeconomists study

▪ the tools macroeconomists use

▪ some important concepts in macroeconomic

analysis

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Important issues in macroeconomics

▪ Why have some countries experienced rapid growth in incomes over the past century while others stay in poverty?

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

▪ Why do all countries experience recessions and depressions? Can the government do anything?

▪ ……

Macroeconomics, the study of the economy as

a whole, addresses many topical issues:

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Real GDP measures the total income of everyone in the economy

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The inflation rate measures the percentage change in the average level of prices from the year before.

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The unemployment rate measures the percentage of people in the labor force who do not have jobs

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Economic models

…are simplified versions of a more complex reality

▪ irrelevant details are dispensed

…are used to

▪ show relationships between variables

▪ explain the economy’s behavior

▪ devise policies to improve economic performance

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▪ Endogenous variables are those which the model tries to explain

▪ Exogenous variables are those variables that

a model takes as given

MODEL Endogenous

variables Exogenous

variables

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Among Variables

▪ General functional notation

shows only that the variables are related

Qd = 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

Q d = quantity of pizzas that buyers demand

P = price of pizza

Y = aggregate income

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Price

Demand

Q *

P

Supply

Quantity

*

Demand equation:

Q d = D (P,Y )

Supply equation:

Q s = S (P, Pm)

Economist assumes that price of pizza adjusts until Q d equal Q s

Q d = Q s

Supply-and-demand diagram

It describes the relationship between buyers and sellers in

the market

The point of intersection is

called an equilibrium.

E

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Q

P

D

The demand curve shows the

relationship between quantity

demanded and price, other

things equal

Example: The market for pizza

The supply curve shows the

relationship between quantity

supplied and price, other things

equal

S

equilibrium

price

equilibrium quantity

E

At the equilibrium price, consumers choose to buy the

amount of pizza that pizzerias choose to produce.

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1) The effects of an increase in income

Q

Quantity

of pizza

P

Price

D1

Q1

P1

An increase in income

increases the quantity

of pizza consumers

demand at each price…

…which increases

the equilibrium price

and quantity.

P2

Q2

demand equation:

D2

A shift in Demand