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    Macro Economics: A Simplified Detailed Edition for Students Understanding Fundamentals of Macroeconomics
    Macro Economics: A Simplified Detailed Edition for Students Understanding Fundamentals of Macroeconomics
    Macro Economics: A Simplified Detailed Edition for Students Understanding Fundamentals of Macroeconomics
    Ebook120 pages1 hour

    Macro Economics: A Simplified Detailed Edition for Students Understanding Fundamentals of Macroeconomics

    By Hesbon R.M

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    About this ebook

    Macro Economics: A Simplified Detailed Edition for Students Understanding Fundamentals of Macroeconomics: This book emphasizes the relevance of macroeconomics' classical roots and its current practice with  Questions and Answers Featuring the latest data, new case studies focused on recent events. While maintaining the clear, accessible writing style and precise presentation that are the hallmark with Dozens of new applications emphasize the real-world relevance of economics for today's students.

    This book will enable you learn and understand The Macroeconomics: Growth and Fluctuations, Measuring Economic Performance: Output and Income, The Long-Run Growth Model, Fiscal and Monetary Policy in the Growth Model, Unemployment job Creation and Job Destruction, Short-Run Fluctuations and Spending Balance, Financial Markets and Aggregate Demand, The Adjustment Process, Macroeconomic Policy, The Consumption Demand, Investment Demand, Foreign Trade and the Exchange Rate, Spending, Taxes, and the Budget Deficit, The Monetary System and the Fed's Policy Rule, The Micro Foundations of Price Rigidity, Inflation and Output Fluctuations, Designing and Maintaining a Good Macro Policy plus The World Economy.

    LanguageEnglish
    PublisherHesbon R.M
    Release dateJan 2, 2019
    ISBN9781386951780
    Macro Economics: A Simplified Detailed Edition for Students Understanding Fundamentals of Macroeconomics

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      Book preview

      Macro Economics - Hesbon R.M

      Chapter 1: The Macroeconomics: Growth and Fluctuations

      MACROECONOMICS STUDIES the aggregate economy - how and why the economy grows and fluctuates over time. Macro Theory provides a means by which an informed person can make predictions on the economic future.

      Theory sets up simplified models which can determine the direction or movement of focus variables using (graphical models) or the numerical values of focus variables (numerical models). Econometric models can be estimated using econometrics. In most cases the only statistics needed is mean, variance and OLS. OLS models can be estimated using EXCEL, SPEAKEASY or B34S or many other systems.

      Key facts:

      Growth around 2.5 % for past 25 years.

      Growth above average for 6 consecutive years between 1983-1988

      Figure 1-1 shows 1968-1991 history, while figure 1-2 shows deviations from trend

      Real gross domestic product (GDP) measures actual physical production. Figure 1-3 shows history since 1910.

      Figure 1-4 Employment as a percentage of working age population

      Figure 1-5 shows unemployment rate.

      Figure 1-6 shows Inflation. Note 1974 and 1980 period. Look at figure

      1-7.What is the relationship between inflation and interest rates?

      Figure 1-8 shows that money supply seems to decline before recessions. In 1989 rate of increase slowed.

      Long run growth a function of population, capital (physical & human) and technology.

      Key terms: potential output or GDP, aggregate demand curve.

      Assume fixed potential output, changes in prices occur after a change in aggregate demand.  What changes aggregate demand?

      Assume prices are fixed. Under what conditions can changes in aggregate demand cause changes in output? Output must below potential.

      WORK ANALYTICAL PROBLEM # 3 page 23. In addition to the questions asked, calculate the correlation between the actual rate of inflation and the two forecasts. Where needed, numerical problems have been solved using SPEAKEASY. SPEAKEASY is available on icarus at uic. Inspection of the SPEAKEASY code will allow the reader to see the logic of the problem. Once the logic is seen, the problem can be placed in Excel ® or other system. The b34s® MATRIX command is an alternative to SPEAKEASY. There is a free student version of B34S. B34S is also available on icarus.

      :_list p1d3

      LISTING OF PROGRAM P1D3

      1 PROGRAM

      2 YEAR=INTEGERS(1977,1995)

      3 P=60.6 65.2 72.6 82.4 90.9 96.5 99.6 103.9 107.6 109.6 113.6 118.3

      4 P(13)=124.0 130.7 136.2 140.3 144.5 148.2 152.4

      5 INT=5.5 7.6 10 11.4 13.8 11.1 8.8 9.8 7.7 6 8.1 6.9 8.0 7.5 5.5

      6 INT(16)=3.6 3.1 4.7 5.7

      7 TABULATE YEAR P INT

      8 J=INTEGERS(NOROWS(P)-1)

      9 INF=ARRAY(NOROWS(P):)

      10 FINF=ARRAY(NOROWS(P):)

      11 $ THIS GETS INFLATION

      12 INF(J+1)=(P(J+1)-P(J))/P(J)

      13 J=INTEGERS(NOROWS(P)-3)

      14 $ THIS GETS INFLATION FORECAST

      15 FINF(J+3)=.5*(INF(J+1)+INF(J+2))

      16 INT=INT/100.

      17 TABULATE YEAR P INT INF FINF INT-INF, INT-FINF

      18 FREEIF X

      19 FREEIF Y

      20 $ GET SERIES WITH SAME NUMBER OF OBSERVATIONS

      21 X(J)=FINF(J+3)

      22 Y(J)=INF(J+3)

      23 TABULATE X Y

      24 CORRELATE X Y

      25 END

      :_p1d3

      EXECUTION STARTED

      YEAR  P  INT  YEAR  P  INT

      1977  60.6  5.5  1987  113.6  8.1

      1978  65.2  7.6  1988  118.3  6.9

      1979  72.6  10  1989  124  8

      1980  82.4  11.4  1990  130.7  7.5

      1981  90.9  13.8  1991  136.2  5.5

      1982  96.5  11.1  1992  140.3  3.6

      1983  99.6  8.8  1993  144.5  3.1

      1984  103.9  9.8  1994  148.2  4.7

      1985  107.6  7.7  1995  152.4  5.7

      1986  109.6  6

      YEAR  P  INT  INF  FINF  INT-INF  INT-FINF

      1977  60.6  .055  0  0  .055  .055

      1978  65.2  .076  .075908  0  9.2409E-5  .076

      1979  72.6  .1  .1135  0  -.013497  .1

      1980  82.4  .114  .13499  .094702  -.020986  .019298

      1981  90.9  .138  .10316  .12424  .034845  .013758

      1982  96.5  .111  .061606  .11907  .049394  -.0080708

      1983  99.6  .088  .032124  .082381  .055876  .0056192

      1984  103.9  .098  .043173  .046865  .054827  .051135

      1985  107.6  .077  .035611  .037649  .041389  .039351

      1986  109.6  .06  .018587  .039392  .041413  .020608

      1987  113.6  .081  .036496  .027099  .044504  .053901

      1988  118.3  .069  .041373  .027542  .027627  .041458

      1989  124  .08  .048183  .038935  .031817  .041065

      1990  130.7  .075  .054032  .044778  .020968  .030222

      1991  136.2  .055  .042081  .051107  .012919  .0038926

      1992  140.3  .036  .030103  .048057  .0058972  -.012057

      1993  144.5  .031  .029936  .036092  .0010641  -.0050919

      1994  148.2  .047  .025606  .030019  .021394  .016981

      1995  152.4  .057  .02834  .027771  .02866  .029229

      X  Y

      .094702  .13499

      .12424  .10316

      .11907  .061606

      .082381  .032124

      .046865  .043173

      .037649  .035611

      .039392  .018587

      .027099  .036496

      .027542  .041373

      .038935  .048183

      .044778  .054032

      .051107  .042081

      .048057  .030103

      .036092  .029936

      .030019  .025606

      .027771  .02834

      CORRELATE X Y =  .71194

      MANUAL MODE

      :_journal off

      Chapter 2: Measuring Economic Performance: Output and Income

      Gross Domestic Product => Production during a particular period of time. Can be measured as spending on goods and services, or production in different industries or income earned by different groups.

      GDP = Y = C + I + G + X

      X = exports – imports

      C = durable goods + nondurable goods + services

      I = fixed investment + inventory investment

      fixed investment = nonresidential + residential

      Investment is a flow of new capital added to stock of capital. Net investment = gross investment - depreciation.

      Investment = (Capital stock)t – (capital

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