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 DollarSafe Haven? Where to Find the Numbers • • • • • • http://research.stlouisfed.org/fred2/ www.bls.gov/data/ www.economist.com www.bea.doc.gov http://www.gpoaccess.gov/eop/ www.oecd.org 17 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