Macroecnomics

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1. Overview of the Modern Macroeconomy 1.1 Essential Structure (1) Scarcity in Resources  Choice = Decision Making = Tradeoff Market/Price Mechanism  Exchange = Swap = Transaction = Trading Factor Demanders (Employers)

Micro Partial Equilibrium  Macro General Equilibrium

Factor Markets
Labor etc. Wage etc.

Factor Suppliers (Employees)

Production Cost Firms

(Labor) Income Intervention by Policy and Regulation Government Transfer Income Tax

Subsidy Sales Tax

Households

Intertemporal Financial System [Markets + Institutions]
Funds Demanders (Investors/Borrowers)  Funds Suppliers (Savers/Lenders) Real Sector Flows Money Sector Flows

Sales Revenue
Goods Suppliers (Producers) q = f (L, K, M, T, E) Transformation

Expenditure Product/Service

Consumption Budget
Goods Demanders (Consumers) U = f (q1, q2, …) Transformation

Goods Markets

Macroeconomics U1: Blanchard Chs. 1~2, 27

1. Overview of the Modern Macroeconomy 1.1 Essential Structure (2) Atemporal Transaction in Goods or Factor Markets Supplier/Seller  Receive Goods or Factors Money Payments

Demander/Buyer  Pay

Intertemporal Transaction in the Financial System NOW: Issuing Security = Debt Contract = Claim = Financial Instrument Real Asset [Capital/Fixed/Direct Investment]  Financial Asset [Financial Investment]

Fund Supplier Lender/Saver/Creditor/F.I. Security Demander/Investor

Funds Security

Fund Demander Borrower/Debtor/C.I. Security Supplier/Issuer

FUTURE = Maturity [Term to Maturity or TTM]
Fund Supplier Lender/Saver/Creditor/F.I. Security Demander/Investor Funds + YLD Security Fund Demander Borrower/Debtor/C.I. Security Supplier/Issuer

Macroeconomics U1: Blanchard Chs. 1~2, 27

Macroeconomics [1] by C-J Huang

1

1. Overview of the Modern Macroeconomy 1.2 Key Indicators (1)

• Key Indicator (1): GDP  GNP Y Aggregate [Total] Output Measured in National Income and … Accounts Nationality  Residence Domestic Foreign Domestic A B Foreign C D

• Production Side [Final  Added Value]; Income Side [T2-1]; Demand Side [U2] • Production/Output Income Demand Macroeconomics U1: Blanchard Chs. 1~2, 27

1. Overview of the Modern Macroeconomy 1.2 Key Indicators (2)

• Method 1: Total Dollar Value of Final Goods and Services Produced for the Market in an Economy During a Period Nominal GDP $Yt  Ptt  Q Real GDP Yt  P0t [Chained Dollar]  Q Base Year [F2-1]: $Yt  t [Micro] Y • Method 2: Sum of Value Added VA  Output – Intermediate Goods Macroeconomics U1: Blanchard Chs. 1~2, 27

Macroeconomics [1] by C-J Huang

2

1. Overview of the Modern Macroeconomy 1.2 Key Indicators (3)

Stock Time

Since  By

Flow

Point: At/On/From/To Balance Sheet; Debt Accumulated/Permanent

Period: In/During/Over/For Income Statement; Deficit Changed/Temporary

Value

Utility Level; Population Marginal Utility; Birth/Death Result/State Wealth/Savings/Asset Process Income/Saving/Surplus

Event

Macroeconomics U1: Blanchard Chs. 1~2, 27

1. Overview of the Modern Macroeconomy 1.2 Key Indicators (4)

• GDP Level = Economic Size Per Capita/Head: Average (1) Output/ Productivity; (2) Income; (3) Standard of Living  Real Purchasing Power Quality of Goods: Hedonic Pricing • GDP Change/Growth (Yt – t–)/Yt– Y 1 1 Expansion  Recession [F2-2/P26] • Time Span: Short  Medium  Long Run Macroeconomics U1: Blanchard Chs. 1~2, 27

Macroeconomics [1] by C-J Huang

3

1. Overview of the Modern Macroeconomy 1.2 Key Indicators (5)

• Key Indicator (2): Unemployment Rate u u  U/(Labor Force); U = Job Seekers US CPS; Social  Economic Issues Underground Economy: Overstated • Key Indicator (3): Inflation Rate  General Price Level/Index; Deflation Income Distribution  Pure Inflation; Decision Distortion by Uncertainty Macroeconomics U1: Blanchard Chs. 1~2, 27

1. Overview of the Modern Macroeconomy 1.2 Key Indicators (6)

 (Pt – t–)/Pt–  Inflation = Change in the Price Level ...
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