MacroeconomicsI_working_version (1)

More documents

Recommendations

Info

Macroeconomics Equilibrium within Model AS – AD 19 3. Macroeconomic Equilibrium within Model AS – AD Contents: 3. MACROECONOMIC EQUILIBRIUM WITHIN MODEL AS – AD ......................... 19 3.1. AGGREGATE DEMAND.................................................................................................... 20 3.1.1. The Structure of Aggregate Demand...................................................................... 21 3.1.2. The Slope of AD Curve........................................................................................... 22 3.1.3. Determinants of Aggregate Demand...................................................................... 23 3.2. AGGREGATE SUPPLY ...................................................................................................... 25 3.2.1. The Slope of AS Curve............................................................................................ 25 3.2.2. Determinants of Aggregate Supply ........................................................................ 27 3.2.3. Keynesians vs. Classics.......................................................................................... 28 3.3. EQUILIBRIUM WITHIN AS – AD MODEL: REAL OUTPUT AND THE PRICE LEVEL ............ 29
20 Chapter 3 In this chapter we introduce the first model. AS – AD model is a widely mentioned model in Macroeconomics. Before we start examining the economy through this model, let’s repeat briefly the essence of macroeconomics. Macroeconomics focuses on the behaviour of the entire economy. It is concerned with the economy’s total output of goods and services, the growth of output, the inflation rates, unemployment, exchange rates, and balance of payment. In Macroeconomics we examine the rises (booms) and recessions of the economic performance of a country. Macroeconomics is concerned with both long-run economic growth and the fluctuations in the short run that constitute business cycle. Macroeconomics also examines policies that affect consumption and investment, currency, trade balance or performance of the economy in general. It deals with the determinants of changes in wages and prices, monetary and fiscal policies, interest rates, the money stock, the budget of a country, and the national debt. Briefly spoken, macroeconomics is concerned with the main economic issues and problems affecting the living standards of the people. Sometimes we have to reduce or omit the complicated details of the economy to manageable fundamentals so that we could understand the essential interactions among goods, assets and labour markets in the economy and the linkages among national economies as well. Macroeconomic Models in Different Time Frames In Macroeconomics, we examine the real world through the models that have its greatest applicability in different time frames. The growth theory, which focuses on the growth of productive capacity, dominates the models examining the long–run behaviour of the economy. Productive capacity is considered as given in the medium-run. The level of productive capacity determines output, and fluctuations in demand relative to this level of supply determine prices and inflation. In the short run, we examine the fluctuations in demand, which determine how much of the available capacity is used. The extent of used capacity determines the amount of employed resources, and thus the level of output and employment. 3.1. Aggregate Demand The level of aggregate demand represents the total demand for goods (and services) to consume, for new investment, for goods purchased by the government, and for net goods to be exported. Aggregate demand could be depicted as a schedule or curve, which shows the various amounts of goods and services (the amounts of real output) that domestic consumers, firms, government, and foreign purchasers collectively wish to purchase at each possible price level. Ceteris paribus (other things equal) the lower the price level, the larger the real GDP the purchasers will demand. Conversely, the higher the price level, the smaller the
Page 1 and 2: Mendel University for Agriculture a
Page 3 and 4: 2 Chapter 1 To understand the funda
Page 5 and 6: 4 Chapter 1 1.2. Macroeconomics vs.
Page 7 and 8: 6 Chapter 1 Policy economics Theore
Page 9 and 10: 8 Chapter 1 Figure 1.3 How models w
Page 11 and 12: 10 Chapter 1
Page 13 and 14: 12 Chapter 2 The mainstream economi
Page 15 and 16: 14 Chapter 2 contributed to repeali
Page 17 and 18: 16 Chapter 2 2.4. (Neo)conservative
Page 19: 18 Chapter 2
Page 23 and 24: 22 Chapter 3 3.1.2. The Slope of AD
Page 25 and 26: 24 Chapter 3 Changes in Aggregate D
Page 27 and 28: 26 Chapter 3 Let’s assume, for no
Page 29 and 30: 28 Chapter 3 A rise in productivity
Page 31 and 32: 30 Chapter 3 P AD E AS 1. Equilibri
Page 33 and 34: 32 Chapter 4 The main aim of human
Page 35 and 36: 34 Chapter 4 4.2.1. Growth Accounti
Page 39 and 40: 38 Chapter 5 The business cycle cou
Page 41 and 42: 40 Chapter 5 5.3. Types of Business
Page 43 and 44: 42 Chapter 5 5.4.2. Supply Side Bus
Page 45 and 46: 44 Chapter 6 The goal of this chapt
Page 47 and 48: 46 Chapter 6 Final goods cover good
Page 49 and 50: 48 Chapter 6 The relationship descr
Page 51 and 52: 50 Chapter 6 Table 6.1 Accounting s
Page 53 and 54: 52 Chapter 6 “domestic”. GDP me
Page 55 and 56: 54 Chapter 6 6.3.2.2. Disposable In
Page 59 and 60: 74 Chapter 8 This chapter is dedica
Page 61 and 62: 76 Chapter 8 S Real wage Labour Sup
Page 63 and 64: 78 Chapter 8 In the case that the M
Page 65 and 66: 80 Chapter 8 Supply Real wage w A D
Page 67 and 68: 82 Chapter 8 If the total labour fo
Page 69 and 70: 84 Chapter 8 8.4.3. Types of Unempl
Page 71 and 72:
86 Chapter 8 Noneconomic costs Long
Page 73 and 74:
88 Chapter 9 We speak about inflati
Page 75 and 76:
90 Chapter 9 9.2. Three Grades of I
Page 77 and 78:
92 Chapter 9 9.3.2. Cost-Push Infla
Page 79 and 80:
94 Chapter 9 P AS’’ AS’ P‘
Page 81 and 82:
96 Chapter 9 This relationship, kno
Page 83 and 84:
104 Chapter 10 Macroeconomic policy
Page 85 and 86:
106 Chapter 10 11.1.2. Monetary Pol
Page 87 and 88:
108 Chapter 10
Page 89 and 90:
110 Chapter 12 The main tools of go
Page 91 and 92:
112 Chapter 12 P AD’ AD AS Q* Q F
Page 93 and 94:
114 Chapter 12 12.2. Non-Discretion
Page 95 and 96:
116 Chapter 12 12.4. Crowding-Out E
Page 97 and 98:
118 Chapter 13 Central banks have a
Page 99 and 100:
120 Chapter 13 We can summarise the
Page 101 and 102:
122 Chapter 13 (a) Monetary Tighten
Page 103 and 104:
International Linkages 125 14. Inte
Page 105 and 106:
International Linkages 127 A nation
Page 107 and 108:
International Linkages 129 required
Page 109 and 110:
International Linkages 131 foreign
Page 111 and 112:
International Linkages 133 The dete
Page 113 and 114:
Money Market, Money Supply, Money D
Page 115 and 116:
Page 117 and 118:
Page 119 and 120:
Page 121 and 122:
Page 123 and 124:
Page 125 and 126:
Page 127 and 128:
Page 129 and 130:
The Phillips Curve 97 10. The Phill
Page 131 and 132:
The Phillips Curve 99 ∆P/P ∆W/W
Page 133 and 134:
The Phillips Curve 101 10.3. Moving
show all

MacroeconomicsI_working_version (1)

Create successful ePaper yourself

Delete template?

Save as template?