ECON 303
Intermediate Macroeconomics
Instructor:
Bernard Malamud
–Office: BEH 502
Phone (702) 895 –3294
Fax:
895 – 1354
»Email: bernard.malamud@unlv.edu
Website: www.unlv.edu/faculty/bmalamud
Office hours: MTWThF 11:20 -12:30 pm and by
appointment
Course Objectives
Refresh your command of
• Macroeconomic terminology
 eco-talk
• Macro Facts
• Schools of thought
Course Objectives
• Master MODELS
– Demand Side Models  AD
• Multiplier
• IS – LM
– Supply Side Models  AS
• Wage setting – Price setting
• Phillips Curve
– Role of Expectations … in theory and in practice
– Stabilizing an Unstable Economy
• Understanding the current crisis
– Solow Growth Model
Macro - variables
• Output … Real GDP … Growth Rate
• Unemployment
• Inflation … CPI, GDP Deflator
Macro Time Frames
• Short-run … sticky price
• Medium-run … price adjusts
• Long-run … economic growth
The State of Macro…a la Krugman
Keynes (1936): Y = C + I + G
– Economics of effective demand
The “Golden Age” (1946 ~ 1973): Fiscal dominance
Monetarist challenge: G crowded out/M-matters-most
– Friedman: Avoid monetary mischief
“Freshwater” dominance: Rat-X/Efficient Markets
– Lucas: confusion  recession
– Prescott: supply shocks  intertemporal substitution
 recession
“Saltwater” acquiescence: Rat-X with frictions
– New Keynesian models/Monetarist policies
Housing bubble: end of Great Moderation
– Behavioral finance/return of Keynes
Macro Facts: Recession! Recession Over?
Macro Facts: Recessions/Depression
Macro Facts: Unemployment
Macro Facts: Deflation!?!
Macro Facts: Bank Excess Reserves
Macro Facts: Federal Debt
The Current Debate
Stimulus?
Fiscal restraint?
Lessons from the Great Depression
• FDR’s Policies: New Deal or Raw Deal?
Macro Facts: Money Growth
Macro Facts: Trade Deficit
Macro Facts: Merchandise Trade Deficit
Macro Facts: Depreciating DollarSafe Haven?
Where to Find the Numbers
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http://research.stlouisfed.org/fred2/
www.bls.gov/data/
www.economist.com
www.bea.doc.gov
http://www.gpoaccess.gov/eop/
www.oecd.org
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Macroeconomics
The course is divided in three parts: Short -run / Medium-run / Long-run
Short - run: IS / LM  AD
IS: Y = C + I + G
C = c0 + c1 YD = c0 + c1 (Y - T)
I = I0 + b1 Y - b2 i
 Y = {spending multiplier} x {autonomous spending}
LM: (M/P)d = (M/P)s
(M/P)d = L(Y,i)
Ms = [1/(c + r(1-c))]H
= {money multiplier}
x {monetary base}
Medium - run: AD/AS
IS/LM  AD
PS: P = (1+ μ)(W/A)
 SRAS and MRAS
PS/WS  AS
WS: W= Pe Ae f(u,z)
In medium - run, Pe = P  (W/P)WS = (W/P)PS = A / (1+ μ)
Natural/Structural/Equilibrium Rate of Unemployment (un )
“Full - employment” rate of output (YFE) The Green Shaft
When AD or AS shift: MR equilibrium  SR equilibrium P  new MR equilibrium
Productivity and equilibrium rate of unemployment:
Ae = A only in long - run  “Natural rate” decreases with unexpected increase in A
Long - run: Growth
Steady state: s(Y/AN) = (δ + gN + gA )(K/AN)
For simple Cobb-Douglas function: Y = Kα (AN)1-α  Y/AN = {s/((δ + gN + gA )}α/(1-α) 18
Golden - rule saving rate = α