1 ECON 303 Intermediate Macroeconomics Instructor: Bernard Malamud –Office: BEH 502 Phone (702) 895 –3294 Fax: 895 – 1354 » Website: Office hours: MTWThF 9:30-11am; and by appointment

2 Course Objectives Refresh your command of Macroeconomic terminology  eco-talk Macro Facts Schools of thought

3 Course Objectives Master MODELS –Demand Side Models  AD Multiplier IS – LM –Supply Side Models  AS Wage setting – Price setting Phillips Curve –Expectations … in theory and practice –Solow Growth Model

4 Variables of Variables of Output … Real GDP Unemployment Inflation … CPI, GDP Deflator –Time-frames of macroanalysis Short-run … sticky prices Medium-run … prices adjust Long-run … capital accumulates Variables of Macroeconomics

5 Introduction –What’s up … What’s down? Unemployment Oil p r i c e … the macro impacts $ Exchange Rate »Inflation fears US trade deficit –Emerging markets: I N D I A, C H I N A Housing b u b b l e

6 Where to Find the Numbers

7 Macro Pictures: Jobs

8 Macro Pictures: Unemployment

9 Macro Pictures: Fluctuations

10 Macro Pictures: Growth

11 Macro Pictures: Core Prices

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13 Macro Pictures: Budget Deficit

14 Macro Pictures: Exchange Rate

15 Macro Pictures: Payments Deficit

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17 Mock FOMC Presentations -- July 1, – 3 person team Play a Governor of Federal Reserve or President of a District Reserve Bank Powerpoint-assisted presentation the state of the national economy –allude to current economic conditions in districts –focus on the state of the national economy recommendation of why, whether and by how much to change the federal funds rate. phrasing of the statement to be issued at the end of the mock FOMC meeting. Governor of Federal Reserve or President of a District Bank Familiarize yourself with your official’s positions recent speeches minutes of recent FOMC meetings. Seek guidance from your professor –appointments will be arranged, the earlier the better.

18 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 = c 0 + c 1 Y D = c 0 + c 1 (Y - T) I = I 0 + b 1 Y - b 2 i  Y = {spending multiplier} x {autonomous spending} LM: (M/P) d = (M/P) s (M/P) d = L(Y,i) M s = [1/(c + r(1-c))]H = {money multiplier} x {monetary base} Medium - run: AD/AS IS/LM  AD PS/WS  AS PS: P = (1+ μ)(W/A) WS: W= P e A e f(u,z) In medium - run, P e = P  (W/P) WS = (W/P) PS = A / (1+ μ)  Natural/Structural/Equilibrium Rate of Unemployment (u n )  “Full - employment” rate of output (Y FE )  The Green Shaft  SRAS and MRAS When AD or AS shift: MR equilibrium  SR equilibrium  P  new MR equilibrium Long - run: Growth Steady state: s(Y/AN) = (δ + g N + g A )(K/AN) For simple Cobb-Douglas function: Y = K α (AN) 1-α  Y/AN = {s/((δ + g N + g A )} α/(1-α) Golden - rule saving rate = α Productivity and equilibrium rate of unemployment: A e = A only in long - run  “Natural rate” decreases with unexpected increase in A