Bài giảng MicroEconomics - Chapter 023 An Introduction to Macroeconomics

Chapter 23An Introduction to MacroeconomicsMcGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.Chapter ObjectivesLong-run economic growth and short-run fluctuationsGDP, inflation, and unemploymentSustained increase in living standardsSavings and investmentShocks and sticky pricesPerformance and PolicyReal GDPCorrects for price changesNominal GDPUses current prices UnemploymentInflation Increase in overall level of pricesPerformance and PolicyCan governments:Promote economic growth?Reduce severity of recession?Is monetary or fiscal policy more effective at mitigating recession?Is there a tradeoff between inflation and unemployment?Economic PerformanceOutput growth3.1% per year 1995-2005Unemployment rate4.6% in 2007Inflation rate2.7% in 2007Economic GrowthStandard of living measured by output per personNo growth in living standards prior to Industrial RevolutionModern economic growthOutput per person risesNot experienced by all countriesGDP Per Person 2007Zimbabwe $188United States $45,845Canada $38,345Japan $33,576United Kingdom $35,134South Korea $24,782France $33,187Russia $14,692Saudi Arabia $23,243Burundi $371Tanzania $1,256North Korea $1,900India $2,659China $5,292Mexico $12,774U.S. dollars based on purchasing power paritySavings and InvestmentSavingTradeoff current for future consumption InvestmentFinancial investmentEconomic investment Banks and financial institutionsShocksDemand shocks and flexible pricesPrice falls if demand lowSales unchangedDemand shocks and sticky pricesMaintain inventorySales changeBusiness cyclesExpectationsThe future is uncertainExpectations affect investmentShocks What happens is not what you expectedDemand shocksSupply shocksDemand ShocksCars per weekPriceDMDLDH900$40,000$37,000$35,000Flexible PricesDemand ShocksCars per weekDMDLDH 700 900 1150$37,000Fixed PricesPriceSticky PricesExplain fluctuations is GDPAverage months between price changes Coin-operated Beer 4.3 Laundry Machine 46.4 Microwave Ovens 3.0 Newspaper 29.9 Milk 2.4 Haircut 25.5 Electricity 1.8 Taxi fare 19.7 Airline ticket 1.0 Veterinary service 14.9 Gasoline 0.6 Magazine 11.2 Computer software 5.5 Sticky PricesMany prices sticky in short runConsumers prefer stable pricesFirms want to avoid price warsAll prices flexible in long runFirms adjust to unexpected, but permanent changes in demandInventory Management Computerized inventory trackingUnexpected changes in demand easier to observeFirms make better output and employment decisionsLess severe business cyclesOnly two mild recessions since adoption Possible explanationKey Termsbusiness cyclerecessionreal GDPnominal GDPunemploymentinflationmodern economic growthsavings investment financial investment economic investment expectations shocks demand shocks supply shocks inventory inflexible prices (“sticky prices”) flexible pricesNext Chapter Preview Measuring Domestic Output and National Income