Summary
Summary Macroeconomics: A European Perspective
- Course
- Institution
- Book
Summary Macroeconomics: A European Perspective
[Show more]
Connected book
Book Title:
Author(s):
- Edition:
- ISBN:
- Edition:
More summaries for
-
Summary book Macroeconomics: A European Perspective
1 review
By: tudorzelina • 1 year ago
Seller
Follow
isabelmaass
Reviews received
Content preview
lOMoARcPSD|11911780Macroeconomics I: European perspective
Introductory lecture
Macroeconomics
- The big picture
- What happens to (parts of) entire economies?
- Income, growth, unemployment, inflation, etc.
- Relationships between these variables
- Globalisation
o Goods, services, capital, people
- Economic shocks
- Government policies
- Importance of institutions
o European Union, exchange rate mechanism, labour markets, etc.
Output and time
“The most important goal of macroeconomics is to develop an understanding of what makes income
differ between countries and what makes them grow or fluctuate over time” (Gartner, p. 36)
- Analysing equilibrium
- Comparing equilibriums
- How do countries move between equilibriums?
- Different time frames
o Different processes
o Different variables
o Different policies
Short and long run
- Analysis and explanations depend on time frame
- Key: what do we assume about prices?
Quantity equation MxV = PxY
(V assumed fixed)
Long run: Y determined by production factors ΔM =ΔP
Short run: Y determined by M
ΔM = ΔY P assumed fixed
Aggregate supply curve
Two cases;
, lOMoARcPSD|11911780
Chapter 2: Booms and Recessions
- Short run analysis
- How to explain booms and recessions?
- Look at aggregate demand!
o Fluctuations in aggregate demand explain deviations of economy from
potential income (see next slide)
- John Maynard Keynes
o General Theory of Employment, Interest and Money (1936)
- Government can (and should) influence economy by influencing aggregate demand
Different types of income Y
Demand side analysis
Ignore price effects: everything that is demanded is supplied at the same price -> horizontal supply
curve
To analyse the functioning of the economy we can focus on demand.
Circular flow model
, lOMoARcPSD|11911780
Income = expenditure
Keynesian cross
The Keynesian cross contains two lines. The 45° line measures actual expenditure which always
equals income. At points above this line, desired demand exceeds output; at points below, the
opposite is true. The aggregate expenditure line indicates the sum of all spending plans. Both lines
cross in A, meaning that here spending plans are perfectly compatible with income.
, lOMoARcPSD|11911780
Fiscal policy
- Government can try to influence Y
- Fiscal policy
o Government expenditure
o Tax rate
- Big breakthrough of this type of Keynesian thinking
- Effect of policy is larger than size of policy
- Multiplier effect
Small changes in AE can have large effects on income
Triggers for booms and recessions
Chapter 3: IS-LM model
Investments play a key role
So we need to know the interest rate:
- Introduction of money market to better understand goods market
- Money market gives a new policy tool: Monetary
policy Short run analysis = fixed P ΔM = ΔY
Money market: demand (1)
- Market for money: demand and supply
- Price of money: interest rate
- What determines demand for money Ld?
o (Wealth ≠ money!)
- Demand for liquidity: money as means of exchange
- Income (Y) positive effect
- ↑ Y → ↑ Consumption → ↑ Ld
Money market: demand (2)
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller isabelmaass. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $5.41. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
75057 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now