1. ECON 303 Intermediate Macroeconomics Instructor: Bernard Malamud
Office: BEH 502
Phone (702) 895 –3294
Fax: – 1354
Website:
Office hours: MTWThF 11:30 – 12:30 pm
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
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

4. 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

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

6. Deviation of Actual from Potential GDP (Fraction of Potential)

7. Macro Pictures: Unemployment
Great Moderation

8. Inflation Rates: CPI and Core CPI
CRISIS

9. Macro Facts: Federal Debt

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

11. Macro Facts: Bank Excess Reserves

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

13. Macro Facts: Trade Deficit, Goods & Services

14. Major currencies/$
Broad basket of currencies/$

16. Average annual rates of growth, 1870-1998, world and main regions
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

17. 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

18. 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%

25. Where to Find the Numbers

26. 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

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