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 11:30 – 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 financial crisis and Slump Revolution and evolution in macro-thought Solow Growth Model

Macro – variables: Real and Nominal Output … Real GDP… Growth Rate Employment – Unemployment Wage level – Price level Inflation … CPI, GDP Deflator Interest rates Macro Time Frames Short-run … sticky price Medium-run … price adjusts Long-run … economic growth

Macro Facts: Growth, Recession and Slump The Long Slump The Long Slump

Deviation of Actual from Potential GDP (Fraction of Potential)

Macro Pictures: Unemployment Great Moderation

Inflation Rates: CPI and Core CPI CRISIS

Macro Facts: Federal Debt

Americans Do Debt Total Debt Non-Financial Sectors Household mortgages Federal Gov’t Business debt Total Debt Non-Financial Sectors Consumer credit

Macro Facts: Bank Excess Reserves

M1/Monetary Base=M1/(Currency + Reserves)

Macro Facts: Trade Deficit, Goods & Services

Major currencies/$ Broad basket of currencies/$

Average annual rates of growth, 1870-1998, world and main regions   1870 - 1998 1870 - 1913 1913 - 1950 1950 - 1973 1973-1998 World 1.48 1.30 0.91 2.93 1.33 Western Europe 1.74 1.32 0.76 4.08 1.78 Europe1 Western offshoots(b) 1.87 1.81 1.55 2.44 1.94 Japan 2.63 0.89 8.05 2.34 Asia (excluding Japan) 0.38 -0.02 2.92 3.54 Latin America 1.41 1.42 2.52 0.99 Eastern Europe 1.22 1.15 1.50 3.49 -1.10 Africa 0.88 0.64 1.02 2.07 0.01

Crisis & 1983 – 2007 Great Slump Moderation 0.6% 3.3% 1974 – 1982 Stagflation & Dis- Inflation 2.0% 1947– 73 Golden Age 4.0% Annual Growth

1947– 73 Golden Age 2.8% Annual Inflation 1983 – 2007 Great Moderation 3.1% Crisis & Slump 1.8% 1974 – 1982 Stagflation & Dis- Inflation 8.7%

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

Macroeconomics The course is divided in three parts: Short -run / Medium-run / Long-run Short – run (sticky price): IS / LM  AD 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} 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} Medium – run (flexible price): AD/AS IS/LM  AD PS/WS  AS PS: P = (1+ μ)(W/A) WS: W= Pe Ae f(u,z)  SRAS and MRAS 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 (factor supplies change): 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) Golden - rule saving rate = α

Americans Do Debt Household mortgages Federal Gov’t Business debt Consumer credit