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Macroeconomics Review 3

Macroeconomics Review 3. 08 金融 梁剑雄 Tel ： 15013229729 QQ ： 424143870 E-mail ： 424143870@qq.com. Outline. Some Reviews on the Quizzes Goods Market and IS Curve Money Market and LM Curve IS-LM Model AD Curve and Short-run Equilibrium Consumption and Saving Investment. Outline.

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Macroeconomics Review 3

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  1. Macroeconomics Review 3 08金融 梁剑雄 Tel：15013229729 QQ：424143870 E-mail： 424143870@qq.com

  2. Outline • Some Reviews on the Quizzes • Goods Market and IS Curve • Money Market and LM Curve • IS-LM Model • AD Curve and Short-run Equilibrium • Consumption and Saving • Investment

  3. Outline • Some Reviews on the Quizzes • Goods Market and IS Curve • Money Market and LM Curve • IS-LM Model • AD Curve and Short-run Equilibrium • Consumption and Saving • Investment

  4. Quiz A • 1 考察一个如右图所示的经济体，假定基期是2000年，请回答下面问题： • (1) 如果商品A和B都是最终商品，那么这个经济体2001年的实际GDP是多少？GDP缩减指数是多少？ • (2) 如果商品A和B都是消费者一篮子产品中的商品，那么这个经济体2001年的CPI是多少？ • (3) CPI和GDP缩减指数是否相同？为什么？

  5. Quiz A • 2 画图说明在Solow模型里存在一个稳态；画图说明储蓄率上升将会对经济体的长期增长带来的影响。如何有效地鼓励一个经济体积累资本？ •  3 试述经济增长理论的发展历程。技术生产有何特征？如何把其内生？ •  4 什么是Phillips曲线？它是如何发展的？为什么能够翻译成短期供给曲线？ • Tips: 第1题第三问，要答出算法不同并且范围也不同。第2题第三问，关键要指出储蓄是可以内生的。第3题第二问答案很多，可以是固定成本低、边际成本高，外部性，非竞争性，创造性毁灭等等；第三问，可以通过外部性实现内生，人力资源有外部性，知识有外部性，等等，也可以答通过“干中学”，即在资本深化的过程中学习知识。第4题第二问，从工资增长率到通货膨胀，从无预期到有预期；第三问要说出奥肯定律，当然也要指出从工资增长率到通货膨胀的变化。

  6. Quiz B • 1 如何按照收入法核算GDP？假定一个经济体的总量生产函数是，市场是完全竞争的，生产要素按照边际贡献参与分配，请计算资本所得和劳动所得占GDP的比重是多少？劳动所得所占比重在什么情况下可能下降？ •  2 画图说明在Solow模型里存在一个稳态；画图说明人口增长速度下降将会对经济体的长期增长带来的影响。如何有效地鼓励一个经济体控制人口增长？ •  3 什么是增长核算？亚洲四小龙为什么能够没有靠技术进步就实现了快速增长？这种增长方式需要转变吗？为什么？ •  4 什么是预期通货膨胀？如何把它引入Phillips曲线？如何把它引入供给曲线？

  7. Tips • 1.收入法是按照生产要素的所得来核算gdp，如劳动报酬，资本所得等等。第二问注意不要搞出增长核算的公式来，比如劳动所得，应该是每单位劳动的工资乘以劳动总量再除以总收入，由于在竞争的市场里面要素价格等于其边际产出，故工资等于MPL，因此劳动所得MPL×L/Y，再把Y的公式带入即可。第三问的答案很多，容易想到的是改变产出弹性阿尔法（单说出这点没满分），垄断的市场，结构的变化，技术的进步，扭曲等等。 • 2.说说第三问，大家答些有经济学含量的答案。比如增加生育的成本，增加做妈妈的成本，补贴，发展经济等等。 • 3.要紧的是意识到，亚洲四小龙的高速增长是短期的，原因课本中有讲，勤劳（高劳动参与）、节俭（高储蓄）、人力资本、良好的竞争市场环境等等。后来四小龙的增速放缓了，一般认为是到了稳态（用带技术增长的 Solow model来解释），需要转变增长方式。（其他解释言之有理也可得分。） • 4.预期的含义是基于现有信息的条件期望，答到相类似的意思即可，不一定要说出“数学期望”。其他两问参见Quiz A的提示。

  8. P AD AS Y Y* The AS-AD Model

  9. Introduction: Establishment of Macroeconomics John Maynard Keynes (1883-1946)

  10. Introduction: Establishment of Macroeconomics The General Theory of Employment, Interest and Money (1936)

  11. Introduction: IS-LM Model • The IS-LM model is the leading interpretation of Keynes’s theory. The IS-LM model was introduced in the article by Sir John Hicks,"Mr Keynes and the Classics: A Suggested Interpretation ", 1937, Econometrica. Sir John Hicks(1904-1989) 1971 Nobel Prize Winner

  12. Introduction: IS-LM Model versus theGeneral Theory The IS-LM model ignores: • Time • Uncertainty • Expectations • Speculation • Animal spirits

  13. Overview: IS-LM Model

  14. Outline • Some Reviews on the Quizzes • Goods Market and IS Curve • Money Market and LM Curve • IS-LM Model • AD Curve and Short-run Equilibrium • Consumption • Investment

  15. Goods Market: Assumptions • 1) A closed economy • 2) Sticky prices (So Changes in aggregate demand influence income) • 3) Firms are willing to sell any amount of output at the given level of prices. (i.e. the AS curve is entirely flat.)

  16. The Consumption Function • Note: Private saving Marginal Propensity to Consume (MPC) Marginal Propensity to Save (MPS)

  17. Aggregate (Planned) Expenditure • Planned(or desired) investment and government spending are given here.

  18. Equilibrium

  19. Equilibrium (continued) • Solve • i.e. • We have

  20. Multiplier • Investment multiplier • Multiplier of autonomous consumption • Multiplier of government purchase • Tax multiplier

  21. [Appendix] Explanation of Multiplier • Suppose there is an increase in government purchases. The increase raises income, it also raises consumption, which further raises income, which further raises consumption, and so on. Now, consider the total effect on income: Initial Change in Government Purchases First Change in Consumption Second Change in Consumption Third Change in Consumption

  22. Multiplier: Graph The 45-degree line AD DG×MPC2 DG×MPC DG DG Y1* Y2* Income,Output, Y

  23. Automatic Stabilizer • Now treat tax as proportional income tax: • Back to our equilibrium equation • We have

  24. Automatic Stabilizer • For example, the multiplier of investment is • Proportional income tax automatically reduces the amount by which output changes in response to a change in autonomous demand without case-by-case government intervention. • Automatic stabilizer: A policy that reduces the amplitude of economic fluctuations without regular and deliberate changes in economic policy.

  25. Example: Paradox of Thrift • Suppose the consumption function is where is a parameter called autonomous consumption and is the marginal propensity to consume. • 1) What happens to equilibrium income when the society becomes more thrifty, as represented by a decline in • 2) What happens to equilibrium saving? • 3) Why do you suppose this result is called the paradox of thrift? (Gregory Mankiw, Macroeconomics(5th edition), P280)

  26. Key

  27. Key

  28. Example: Balanced Budget VS Automatic Stabilizers • It is often argued that a balanced budget amendment would actually be destabilizing. To understand this argument, consider the following model of the economy: • and are both constant • 1) Solve for equilibrium output. • 2) Solve for taxes in equilibrium.

  29. Example: Balanced Budget VS Automatic Stabilizers • Suppose that the government starts with a balanced budget and that there is a drop in . • 3) What happens to Y? What happens to taxes? • 4)suppose that the government cuts spending in order to keep the budget balanced . What will be the effect on Y? Does the cut in spending required to balance the budget counteract or reinforce the effect of the drop in on output? Olivier Blanchard, Macroeconomics (2nd edition), P57

  30. Key • 1 • 2 • 3 c0 drops to c2

  31. Key • 4 reinforce the effect. • Let G1 be the new equilibrium government spending. • Then • Since the government starts with a balanced budget

  32. Deriving IS Curve: Investment Function • The planned level of investment is a function of (real) interest rate. We specify this form: i Investment function I(i)

  33. Deriving IS Curve: A Graphical Approach Suppose the interest rate rises…. Y=E E Demand Income, Output, Y i i Investment function The IS Curve I(i) IS Income, Output, Y Investment, I

  34. IS Curve: Algebraic Form • Equilibrium • Multiplier of government purchases • Autonomous spending • Thus, IS Curve

  35. What Is IS Curve? • IS stands for “investment” and “saving”, and the IS curve represents what’s going on the market for goods and services. • IS curve: The negative relationship between the interest rate and the level of income that arises in the market for goods and services.

  36. IS Curve: Some Details • The larger the sensitivity of investment spending to the interest rate and the larger the multiplier, the flatter the IS curve.

  37. Policies and IS Curve i • When government purchases G increase IS IS’ Y

  38. Policies and IS Curve Note: recall i • When income tax rate decreases A, b remains the same, but increases Y

  39. More Analysis • Increases in autonomous consumption or investment or transfers. That’s, only autonomous spending A increases. i IS IS’ Y

  40. More Analysis • Suppose marginal propensity to consume (MPC) increases. Then and both increase. i Y

  41. Outline • Some Reviews on the Quizzes • Goods Market and IS Curve • Money Market and LM Curve • IS-LM Model • AD Curve and Short-run Equilibrium • Consumption and Saving • Investment

  42. Money Demand: Theory of Liquidity Preference • Demand for real balances • The theory of liquidity preference • For simplicity, we use linear expression

  43. i L Money Demand

  44. i i L L Money Demand • Larger h • Larger Y

  45. Money Supply: Some Reviews • M1, M2, M3 • High-powered money, monetary base • Reserve, reserve ratio, Fed • Money multiplier • The instruments of monetary control: open market operations, the discount rate, and the required-reserve ratio • A model:

  46. i i Money supply Money Supply An increase in money supply Money supply

  47. Equilibrium in Money Market The LM Curve • Md=Ms Interest rate, i Interest rate, i Supply i2* i2* Demand,L(i,Y2) i1* i1* Demand,L(i,Y1) M/P Y1 Y2 Suppose income increases….

  48. i LM Y Equilibrium in Money Market (continued) • Classical case

  49. Shifts in the LM Curve Supply The LM Curve1 i i i1* i1* The LM Curve2 i2* i2* Demand,L(i,Y1) Income, output,Y M/P Y1

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