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Macro Lecture 1 - Mankiw

This document provides an overview of macroeconomics concepts from Chapter 1 of the textbook Macroeconomics by G. Mankiw. It discusses key macroeconomic indicators such as GDP, unemployment, and inflation for the US, EU, and Japan from 1960 to 2001. It also introduces economic models, using a supply and demand model of the rice market as an example. The document explains the difference between endogenous and exogenous variables in models, and how prices can be flexible or sticky in the short and long run.

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Putriindah Nw
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Download as PPT, PDF, TXT or read online on Scribd
324 views15 pages

Macro Lecture 1 - Mankiw

This document provides an overview of macroeconomics concepts from Chapter 1 of the textbook Macroeconomics by G. Mankiw. It discusses key macroeconomic indicators such as GDP, unemployment, and inflation for the US, EU, and Japan from 1960 to 2001. It also introduces economic models, using a supply and demand model of the rice market as an example. The document explains the difference between endogenous and exogenous variables in models, and how prices can be flexible or sticky in the short and long run.

Uploaded by

Putriindah Nw
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
You are on page 1/ 15

Macroeconomics by G.

Mankiw

PART 1, CHAPTER 1 : The Science of Macroeconomics Lecture 1

Source : Slide Database by Ron Cronovich + Slides by Nathalie Bolh


CHAPTER 1

The Science of Macroeconomics

slide 0

Learning objectives
This chapter introduces you to

 some important concepts in


macroeconomic analysis

 the issues macroeconomists study  the tools macroeconomists use

CHAPTER 1

The Science of Macroeconomics

slide 1

What is Macroeconomics?
 A global definition  Explanations and Policy prescriptions  Macroeconomics+ Microeconomics =
Economics

 The study of macroeconomic variables

CHAPTER 1

The Science of Macroeconomics

slide 2

Important issues in macroeconomics


 3 major indicators of economic
performance : - GDP and Growth - Unemployment rate - Inflation rate

 3 major economic areas under review :


the USA, the EU and Japan

CHAPTER 1

The Science of Macroeconomics

slide 3

Recent data in the USA


Source: OECD (Y/Y)

19602000 3.5

19922000 3.7

2000/ 2001 4.1/ 1.1

Output growth rate

Unemplo 6.1 yment rate Inflation Rate


CHAPTER 1

5.4

4.0/ 4.8

5.1

1.7

2.3/ 2.1

The Science of Macroeconomics

slide 4

Recent Data in the EU


Source: OECD

19602000 3.1

19922000 2.1

2000/ 2001 3.3/ 1.7

Output growth rate

Unemploy 6.5 ment rate Inflation Rate


CHAPTER 1

9.9

8.1/ 7.8

5.6

1.7

1.5/ 2.5

The Science of Macroeconomics

slide 5

Recent Data in Japan


19602000 Output growth rate 5.5 19922000 1.2 2000/ 2001 1.5/ -0.7 3.0 4.7/ 5.0 -0.1 -1.6/ -1.6
The Science of Macroeconomics
slide 6

Unemplo 2.0 yment rate Inflation 4.5 Rate


CHAPTER 1

Economic models

Mathematics Observation of data => simplified reality

CHAPTER 1

The Science of Macroeconomics

slide 7

The example of a model of supply and demand for rice


 explains the factors that determine the price of
Manggo and the quantity sold.

 assumes the market is competitive  Variables:


Q d = quantity of rice that buyers demand Q s = quantity that producers supply P = price of rice Y = aggregate income Pg = price of grapes (an input)
CHAPTER 1

The Science of Macroeconomics

slide 8

The rice market


 The supply for rice :
Q s = S(P+, Pf-)

 The demand for rice :


Q d =D(P-, Y+)

CHAPTER 1

The Science of Macroeconomics

slide 9

The market for rice: equilibrium


P
Price of rice S

equilibrium price
D

Q
equilibrium quantity
CHAPTER 1

Quantity of rice

The Science of Macroeconomics

slide 10

The effects of an increase in income:


demand equation: Q d ! D (P ,Y )

P
Price of rice P2 P1 D1 Q1 Q2 D2 S

Q
Quantity of rice

CHAPTER 1

The Science of Macroeconomics

slide 11

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.

CHAPTER 1

The Science of Macroeconomics

slide 12

Prices: Flexible Versus Sticky


 Market clearing: an assumption that prices
are flexible and adjust to equate supply and demand.

 In the short run, many prices are sticky.

 In models : Prices are supposed to be


sticky in the short run and flexible in the long run.

CHAPTER 1

The Science of Macroeconomics

slide 13

Question
1) Macroeconomic issues in the news over the last month? 2) What would be the effect of an increase in the price of Fertilizers on the rice market equilibrium 3) Give the 2 definitions of a recession (the NBER definition and the popular definition) 4) Identify the main recession episodes in the Indonesia economy since 1900

CHAPTER 1

The Science of Macroeconomics

slide 14

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