Klick - middlerun / - Short long rum % in - r / IMPORTANT WORD S Output aggregate ¥::*:: Okuns Law d = GDP "" Curve Phillips - NOMINAL & Nominal GDP is the sum . me Real GDP quantities constant Y the E- and of → goods pm" "" t times stk P . 20 2008 10 ④ 12 240 2010 13 26 - ÷: :* :÷: Real GDP - only ← Good Final the count . Produkt Finales → Goods Final ¥:*: : a - is also called _ . . GDP at " ) : :S " GDP R adjvslet 338 Ö" 240 10-24 288 ^? 312 13-24 200 in : . / euros for inflation / in ( base → Base Hd . constant year ) pries / µ Nominal 24 - goods / GDP in terms of . GBP6200910 - pricesleuros current ' 288 Zeitpunkt We ( GDP ) during economy Nominal GDP is also called ! ' yöiäiöiüiä N in the product Zwischen Produkt . increases iii. we Basisjahr ) produced Services Real GDP in chained pries reflects the goods (→ . Real GDP : of sum final of prices goods domestic gross ÷::-.: :c: price , . " is of - their current , . !!! goods of final quantities Produced times final value of GDP is the output is called aggregate GDPJDEanprio%7a.se?ftgYasre;ansIsajes REAL the of The Measure good Intermediate n run . ewoutegdsoniänonäiücas . . changing quality Example Quality increase of 18% "% : . ¥0 real Price Laptops decade of Quality adjusted by about 25% - - } 7% price has fallen - €4 Nominal GDP UN EMPLOYMENT RATE Labour = Force L employment who people but ↳ not have looking are for Not in the labour force Kids retired people , , looking etc , Force sustained is a rate = „ . humber those , who The level General of total to the deflator The GDP rise prices is the . app is the ratio population in labour of the waking age of _ Deflation is the pz , Background → svstaineddecline a Price level nominal GDP ratio of GDP in t year The rate Proportion ally → to distortion ( Leads due wages to vncertainty , rise € Yt Best rate of inflation : 1- 4% i÷ rum determined long rum : : level of Output by supplyfactors economy dependson abilitytoinnovate . :* equal is Pt to the rate % of 2 , | / ' - Nt - is reduction in the Har = s equal to the rate - - of #ozo : II Pzosg growth = = 1100 1 → GDP Deftator (111/1)=0,1 = 10% rate " 955 %! ratet . of nominal GDP - - - = inflation in the rate % s . ③ . . ° ° . | unemployment that is love than associated with vnemploymentrale is . an increase Rate of inflation ' . . t.im:* . rate " ° ° ° . ° . usual in the :" " ° . . . ⑧ . . .info: :: " to an rate increase Ieads to in a the of inflation rateof inflation real GDP of - charge 1,1 = of inflation - - 0.419*-3%1 - = of nominal GDP growth plus the rate - - .in:7 Output growth \ Previews 1 Pzozo - Empirischer Mittelwert Yt - = 1000 = Nominal GDP €42020 GDP Deflator Pt Rate of Yzozo Real GDP Pott GDP Yt . - uncehmapinoyement / Medium = ofchange index number an - prices Initiieren! ! III:" → Called - Verzerrung) some . raleof inflation Deflator GDP deflator times real GDP tlmportance = Ttt Nominal Gpp . prices and unemployment rate can shortages lead to labour . Yt Is → to . Affects in come distribution when not all efficiency samt tlpn ) year Deflator in Low → rate GDPDEFLATOR level Price using is not human resources . the rate is of the . real inflation rate Welfare on Signal economy → give up ↳ rayofehange.fntaewamjfhs.tw NpjjafppfDP-t.CI the in Important Ce t unemployed force counted as langer no Effect → UIL = employment labour are and so job to the unemployed un Workers a . INFLATION RATE Inflation are labour force participation The . who the unemployed . Mothers at home injuried people in Discouraged for oft job a one : of people Unemployment the humber is § unemployment do employment U t N = Un t humber of Background rate is the ratio of the unemployment The inflation decrease in rate . the A " high vnemployment inflation rate . HEINI Mir r - - - / \ | THE SHORT RUN Gear is - on to - gear Production demand focus movements in come and , THE COMPOSITION OF GDP Production ! Changes ) :p::* :* . Had residential production in changes to in / In come changes in demand for goods Had to . - Exports ( X ) Consumer residential Investment and non . : Net X exports X > IM IM > X and Services goods balance = trade = trade definit sur investment Inventory . by foreigner msojiiiesna.me?..;::::::snaoms trade or IM - : of domestic Purchaises ! ! !!!! !!: = of GDP example investment of The sum : sltotataemand ) purchased by Services ¥:: :* .si:9?5nhinFsr:n::::ngs;::nme::er:a'% ! .name "" Änne Composition and goods : Investment (1) orfixed investment : demnach:S! (c ) consumption . " : Difference between production and Sales Produced but not Sold → Investment plus . → - GOODS DEMAND FOR consumption ( YD ) in come c YD with disposable Slope in come of Co value fit hätt! ( g. DETERMINATION Replacing From = IM ( and Equilibrium in the market requiresy This is an condition Character - ises equilibrium Output in Geb " This Lern which is y i goods - - Z . Rewrileegvation { Reorganise the when es > lncome is Y - ) (y y . closer , ± . " " .me , to 1 Y - (o = It G. Tt + It G : Production # ) g) lneauitibri " > Demand : 4) - by z ' S = . - YD Y - RELATION Saving C - T (S) one " y - for more In equilibrium Y ↳ more T - - one ↳ T = - definit I Tl Z It G t - gmp = It G - It G = (T St = - - C T T - G Junge!!jen ) 15 relation This is the Schnittpunkt equilibrium point " ' Slope -1 \ Equilibrium y > zz z spenaing Investment = Slope : ' " ; ar ¥ Production - Ging G s " = y s = - - - T - T Co - cot ( 1- : (^ (s . ) ( y T) - . (y T ) - , pr.pe lncomey Saving = ⑥ - between on Demand = Investment : Saving equus consumption behaviour man' , Y . :( C - I , effect equilibrium Output Y : Jeder = autonomous spenden, saving G Saving d Public IN consumptiong highereauilibrium - than Saving public - Budget swplus > 0L Budget C - Private ✓ HEELS :3 i has a Gcgovernment and → More income I autonomous ) Spendings) Polly and are independent exogenous = SE mit " # the eguaeto ) . Demand condition that pro YD . describe the Fiscal private jemand Production , Y isdetermined Cs ) people consume = G Kot = Tltaxes ) 15 Equilibrium Output . - ↳ Autonomous consumption Dependingon income ↳T - - Total - - - - consumptionifyoeauabzero.PE?YnistfmeNaoN9 equal - . IM - ( t lt G - . / , eqvation An increase in ' YI I ZZ , Y GI + = ( → -5k autonomous spending ( doesn't dependonincome ) c, >] [ ↳ + Eta : ÷! Gütig: - l ( YD ) C. - ytuefeptfffwts . I + ( Y Ttt It G ✓ , | variables ' q with Z : Cot C1 = Ct It G g) - - It GTX t T - what Aigner → Y Exogenous variables Not explained takenasgiven to some a mode) ↳ (y + - - . % | BF = uatio " variables ' g. is the multiplier . „ y : i 1/1/11 , i µ largo " (y equations ; Ihcsnides Y C : = - and ZE - ( ZE economy - : so y :( otcs : : Den Demand "" = c. Replacing equilibrium . function YD . EQUILIBRIUM OUTPUT economy ) z equations precious EJ : gieren OF I Endogen ous - Takenas ( Closed 0 = YD other I ← ✓ + taxes Paging Consumption variable closed Govenment transfers „ ) T ZE _ ! Higherincome - function of disposabk a ↳ economy . ↳ behavioral ✓ Assume - " "" " Cot Cs ( Y = Loth = . UK ↳ • ( | but less than one for one A lower C1 > is In come after = and Consumptionincreases (C) demand Total open + O and g. 1 . save . NEE in \ / - - / n BASF ( Md Store of value • I transactions t = moneey for :p: %:L!.com , bonds - . . . after . . . ' - - - . . . . . . : . - - DEFINITIONS in come Saving what : over you ewnlftow ) The time liabiüties Financial good - - _ the : - :/ - 100€ I : price or other financial asset are the central bank ↳ . other Md Moves demand . only ÷: " Md i ' . - . . . . . . . . . . A . ' 9 "" Md " charge supplg of selling bonds bybuging market . , the Contract . - - aus . Operations Open Central bank → - the bond market in or supplyof money the expands bybuyingbonds Expansion arg open market operation → contract the ionary - - - bonds supplyofmoney by selling Market open - Operation Liabilities Assets - : Bank or ( " , Vermittler Finanzielle and firms and Use to make 109ns to other people ¥2 Trainierst rate : go below Zero is in a the inlerest rate !!! : : " . when is down to "" :" zero , " :\:* - / mon d Md ( Money Banks E- _ currency ratio reserve f. Md depends bank reserves amount of Hd Morey demand chequeable deposit s . °" # D= demand = EY ( ( i ) Demand demand → chegueable deposit = = -0 EY LCI ) . high power money Hdenotes - - suppy central bank money bank the supply honey , of then : .. . Hd :( Udt Rd gleichgültig ::{÷: :: i doesn't No Central monetary ftp.ebay?ds/YIII3I- , Central Bank charge .in:7: " : " H : f Liabiüties | .sn/--ff:e: : :aeeaui: : nconainon Interstate eiquidity trap / , operation Assets i Liabilities Expansion wg open market I firms and → I thesetobuy money-tiabilitieslikeepsomeands%3e.IE ¥ä%/"P°"A""" } LIQUID , Ty TRAP if Er:{Isis!!!!!:c . . Reserves in LCI ) ÷::* : : Central bank Bondsffnjealeb.ae?mIYc& } money has issved , called central moneef : Asset of the The eiabilities Economy . " → € Pß demand Morey = EY = µ = M Monat , from people financial assets - cannot . Md = Central banks : interest rate today .mn?.nesif M moneysupply . Ms : Moneysupply Ms - : bond on Rec eine Funds → pvrchase of Share > bank - - in Hrestrate - interstate . the interest rate higher Example it . Financial intermedia ries purchaseofanew > Capital Investment . that PART TWO BondsIMoney .ms minus financial Stock variable Investment . love the price Value of Financial assets = . the bond the lower value of accu mutation = Financial wealth Thehigher for transactions pay . - - Interest rate money . day rate = . bond payment per year Price of bond to EPB fetest Investor . . EY in come G ; wen - r . level of amount an Financial in requires independent to i jemand! for money ::* ( Government) time Müssen agieren Equilibrium markets supply of money → : ÷: ÷:: € . M = Supplys : qmount demand people Put their more of i Ms . and i for transactions no because demand rate i - , interstate positive interest t = money C- ) Wealth into bonds interest no - money Central bank : equal to M yoneysuppy interest rate decreases in Increase Ausgangspunkt of inlerest ✓ L (i) . (t ) Count Unit of a • = function rate ; decteasi in come I EY DETER MINING THE INTEREST RATE MONEY Nominal MONS exchange Medium of flink Demand for Morey attribute • DEMAND FOR f. EY - :c:: : : L (i ) : :c : : : All ( l L - - - " HIHI l n - l e l - - - :!Ein µÄÄÄ;÷Ä%J ↳ Framework by Hicks . . THE GOODS MARKET Investment (1) rate ( i ) / / Investment | eauaes , savings - & Hansen . . . T ; IS LM model : . _ . . / depends / = ÷:'( . ( ' ¥!) on ) output - Y " f. 145 Output y y Increaseinlerest rate ↳ deaease : " . . . . _ A . . . . . . demand . goods D D eeads to is the represented by equilibrium the IS - ÷: "" which , is - in ' monetary implies that an increase • a Iow • , achieve it . IS relation : Y =L ( Y - Ttt I ( Y IHG : - _ - - , i T = : - - " - . i interest rate ! " i . in Financial markets interest the in einig:b: ::* I IS , - Y Output llncome) . is curres , represented by are , both the goods horizontal and LM Curve Fiscal . Financial Markets poeicy Decrease in , Y : G - T monetary expansion " y MI !!!!!!!-meintest Y . y cm . ' : . LM curve down ! ts y monetary expansion Shift s ' Is An inctease in taxessni.s.me IS Curve ; left if , Output Y in Bothlead to high output - . decrease equilibrium level Output . . . , Y . ' - Y Pension of ÷::: . " G- T ← Output Y ' A economy is in output is too "" " fiscal Consolidation This leads to 19 ' - inlerestratei in interest rate < . . lncrease → . Lightning output higher ' ' ' used to increase curve down Ieads to and - Contract on Fiscal contraction → shirts the LM . be to I . : Both fiscal and monetary policies can " ' . that the tecession and Suppose . " ÷::*:c: : :S:*: fisalpoeicies depends interestratei :3 :::{ si:p: i y A M monetary POLICYMIX which I ¥595.at?pansioni ← , . Monetary Policy in money moneysupplyeguals demand in come Y and the i - , - demand inlerestratei Decrease real real , price level E:* :*:* üü: Curve in both emanation the : "" less than one for one → . financial markets → by - LM relation " Output in den de equilibrium interstate : i market decrease a Equilibrium in Only in point A in goods ← Output - PUTTING IS II IM RELATIONS TOGETHER in ni ) i: :: ::* Output Y increase Output Y - On output ihres demand ↳ increase in Output y • This . SO as demand for Är inlereaset at Aninaeaiintaxssnstnecurmee rate EY Lli ) the real ' Equilibrium - In equilibrium : upwardsloping because ZZ is IS Curve . - D - . ÷::-. . In - → " . M G t ÷:÷÷ i Interestratei . ) . 145 : - . i , DIE;D . µ market goods sina.%ae.in?:::T:.Y::ni:q..y Eauiyibaapmuevee . " . in Ttt t.LY " : : - : ßzzcurne zl " (Y LM RELATION the interest js.u.me ② ) lfori A ' Demand Z ZZ i ecluilibrium :C andre FINANCIAL MARKETS IS RELATION t Production ( Y) and so ③ Demandt - - = / > r ' Y Output llncome) , , Y