宏观经济学课件

LearningobjectivesThischapterintroducesyoutotheissuesmacroeconomistsstudythetoolsmacroeconomistsusesomeimportantconceptsinmacroeconomicanalysisImportantissuesinmacroeconomicsWhydoesthecostoflivingkeeprising?Whyaremillionsofpeopleunemployed,evenwhentheeconomyisbooming?Whyarethererecessions?

Canthegovernmentdoanythingtocombatrecessions?Shouldit??ImportantissuesinmacroeconomicsWhatisthegovernmentbudgetdeficit?Howdoesitaffecttheeconomy?WhydoestheU.S.havesuchahugetradedeficit?Whyaresomanycountriespoor?

Whatpoliciesmighthelpthemgrowoutofpoverty?U.S.GrossDomesticProduct

inbillionsofchained1996dollarslong-runupwardtrend…U.S.GrossDomesticProduct

inbillionsofchained1996dollarsRecessionslongesteconomicexpansiononrecordWhylearnmacroeconomics?Themacroeconomyaffectssociety’swell-being.example:

UnemploymentandsocialproblemsUnemploymentandsocialproblemsEachone-pointincreaseinthe

unemploymentrateisassociatedwith:920moresuicides（自杀）650morehomicides（杀人）4000morepeopleadmittedtostatementalinstitutions（精神病院）3300morepeoplesenttostateprisons37,000moredeathsincreasesindomesticviolenceandhomelessnessWhylearnmacroeconomics?Themacroeconomyaffectssociety’swell-being.example:

UnemploymentandsocialproblemsThemacroeconomyaffectsyourwell-being.example1:

Unemploymentandearningsgrowthexample2:

InterestratesandmortgagepaymentsUnemploymentandearningsgrowthInterestratesandmortgagepaymentsFora$150,00030-yearmortgage:$11,782$9816.84%Dec2001$12,771$10647.65%Dec2000annualpaymentmonthlypaymentactualrateon30-yearmortgagedateWhylearnmacroeconomics?Themacroeconomyaffectssociety’swell-being.example:

UnemploymentandsocialproblemsThemacroeconomyaffectsyourwell-being.example1:

Unemploymentandearningsgrowthexample2:

InterestratesandmortgagepaymentsThemacroeconomyaffectspolitics¤tevents.example:

InflationandunemploymentinelectionyearsInflationandUnemploymentinElectionYearsyear Urate inflationrate elec.outcome1976 7.7% 5.8% Carter(D)1980 7.1% 13.5% Reagan(R)1984 7.5% 4.3% Reagan(R)1988 5.5% 4.1% BushI(R)1992 7.5% 3.0% Clinton(D)1996 5.4% 3.3% Clinton(D)2000 4.0% 3.4% BushII(R)Economicmodels…aresimpliedversionsofamorecomplexrealityirrelevantdetailsarestrippedawayUsedtoshowtherelationshipsbetweeneconomicvariablesexplaintheeconomy’sbehaviordevisepoliciestoimproveeconomicperformanceExampleofamodel:

Thesupply&demandfornewcarsexplainsthefactorsthatdeterminethepriceofcarsandthequantitysold.assumesthemarketiscompetitive:eachbuyerandselleristoosmalltoaffectthemarketpriceVariables:Q

d=quantityofcarsthatbuyersdemandQ

s=quantitythatproducerssupplyP=priceofnewcarsY=aggregateincomePs=priceofsteel(aninput)Thedemandforcarsshowsthatthequantity

ofcarsconsumersdemand

isrelatedtothepriceofcars

andaggregateincome.Digression:FunctionalnotationGeneralfunctionalnotationshowsonlythatthevariablesarerelated:Alistofthevariables

thataffectQ

dDigression(枝节话):FunctionalnotationGeneralfunctionalnotationshowsonlythatthevariablesarerelated:Aspecificfunctionalformshowstheprecise（准确地）quantitativerelationship:Themarketforcars:demandQQuantityofcarsP

Price

ofcarsDThedemandcurveshowstherelationshipbetweenquantitydemandedandprice,otherthingsequal.Themarketforcars:supplyQQuantityofcarsP

Price

ofcarsDSThesupplycurveshowstherelationshipbetweenquantitysuppliedandprice,otherthingsequal.Themarketforcars:equilibriumQQuantityofcarsP

Price

ofcarsSDequilibriumpriceequilibrium

quantityTheeffectsofanincreaseinincome:D2QQuantityofcarsP

Price

ofcarsSD1Q1P1Anincreaseinincomeincreasesthequantity

ofcarsconsumersdemandateachprice……whichincreasestheequilibriumpriceandquantity.P2Q2Theeffectsofasteelpriceincrease:QQuantityofcarsP

Price

ofcarsS1DQ1P1AnincreaseinPsreducesthequantityofcarsproducerssupplyateachprice……whichincreasesthemarketpriceandreducesthequantity.P2Q2S2Endogenousvs.exogenous

variables:Thevaluesofendogenousvariables（内生变量）

aredeterminedinthemodel.Thevaluesofexogenousvariables（外生变量）

aredeterminedoutsidethemodel:

themodeltakestheirvalues&behavior

asgiven.Inthemodelofsupply&demandforcars,Nowyoutry:Writedowndemandandsupply

equationsforwirelessphones;

includetwoexogenousvariables

ineachequation.Drawasupply-demandgraph

forwirelessphones.Useyourgraphtoshowhowachangeinoneofyourexogenousvariablesaffectsthemodel’sendogenousvariables.AMultitude（大量）ofModelsNoonemodelcanaddressalltheissueswecareabout.Forexample,Ifwewanttoknowhowafallinaggregateincomeaffectsnewcarprices,wecanusetheS/Dmodelfornewcars.Butifwewanttoknowwhyaggregateincomefalls,weneedadifferentmodel.AMultitudeofModelsSowewilllearndifferentmodelsforstudyingdifferentissues(e.g.unemployment,inflation,long-rungrowth).Foreachnewmodel,youshouldkeeptrackofitsassumptions,whichofitsvariablesareendogenousandwhichareexogenous,thequestionsitcanhelpusunderstand,andthoseitcannot.Prices:Flexible（灵活的）VersusSticky（粘性的）Marketclearing:anassumptionthatpricesareflexibleandadjusttoequatesupplyanddemand.Intheshortrun,manypricesaresticky---theyadjustonlysluggishly(缓慢地)inresponsetosupply/demandimbalances.

Forexample,laborcontractsthatfixthenominalwageforayearorlongermagazinepricesthatpublisherschangeonlyonceevery3-4yearsPrices:FlexibleVersusStickyTheeconomy’sbehaviordependspartlyonwhetherpricesarestickyorflexible:Ifpricesaresticky,thendemandwon’talwaysequalsupply.Thishelpsexplainunemployment(excesssupplyoflabor)theoccasionalinabilityoffirmstosellwhattheyproduceLongrun:pricesflexible,marketsclear,economybehavesverydifferently.Outlineofthisbook:Introductorymaterial(chaps.1&2)ClassicalTheory

(chaps.3-6)

Howtheeconomyworksinthelongrun,whenpricesareflexibleGrowthTheory

(chaps.7-8)

ThestandardoflivinganditsgrowthrateovertheverylongrunBusinessCycleTheory

(chaps9-13)

Howtheeconomyworksintheshortrun,whenpricesaresticky.Outlineofthisbook:Policydebates

(Chaps.14-15)

Shouldthegovernmenttrytosmoothbusinesscyclefluctuations?Isthegovernment’sdebtaproblem?Microeconomicfoundations

(Chaps.16-19)

Insightsfromlookingatthebehaviorofconsumers,firms,andotherissuesfromamicroeconomicperspective.ChaptersummaryMacroeconomicsisthestudyoftheeconomyasawhole,includinggrowthinincomeschangesintheoveralllevelofpricestheunemploymentrateMacroeconomistsattempttoexplaintheeconomyandtodevisepoliciestoimproveitsperformance.ChaptersummaryEconomistsusedifferentmodelstoexaminedifferentissues.Modelswithflexiblepricesdescribetheeconomyinthelongrun;modelswithstickypricesdescribeeconomyintheshortrun.Macroeconomiceventsandperformancearisefrommanymicroeconomictransactions,somacroeconomicsusesmanyofthetoolsofmicroeconomics.LearningobjectivesInthischapter,youwilllearnabout:GrossDomesticProduct(GDP)theConsumerPriceIndex(CPI)theUnemploymentRateGrossdomesticproductGDP

isthenamewegivetothetotaldollarvalueofthegoodsandservicesproducedwithinanationduringagivenyear.GrossDomesticProductTwodefinitions:Totalexpenditureon

domestically-produced

finalgoodsandservicesTotalincomeearnedby

domestically-located

factorsofproductionWhyexpenditure=incomeIneverytransaction,

thebuyer’sexpenditurebecomestheseller’sincome.Thus,thesumofallexpenditureequals

thesumofallincome.TheCircularFlowValueaddeddefinition:Afirm’svalueaddedis

thevalueofitsoutput

minus

thevalueoftheintermediategoods

thefirmusedtoproducethatoutput.Exercise:(Problem2,p.38)Afarmergrowsabushelofwheat

andsellsittoamillerfor$1.00.Themillerturnsthewheatintoflour

andsellsittoabakerfor$3.00.Thebakerusestheflourtomakealoafof

breadandsellsittoanengineerfor$6.00.Theengineereatsthebread.ComputevalueaddedateachstageofproductionGDPFinalgoods,valueadded,andGDPGDP=valueoffinalgoodsproduced =sumofvalueaddedatallstages ofproductionThevalueofthefinalgoodsalreadyincludesthevalueoftheintermediategoods,

soincludingintermediategoodsinGDPwouldbedouble-counting.TheexpenditurecomponentsofGDPconsumptioninvestmentgovernmentspendingnetexportsConsumption(C)durablegoods

lastalongtime

ex:cars,homeappliances(家电等)non-durablegoods

lastashorttime

ex:food,clothingservices

workdoneforconsumers

ex:drycleaning,

airtravel.def:thevalueofallgoodsandservicesboughtbyhouseholds.Includes:U.S.Consumption,2001Investment(I)def1:spendingon[thefactorofproduction]capital.def2:spendingongoodsboughtforfutureuse.Includes:businessfixedinvestment

spendingonplantandequipmentthatfirmswillusetoproduceothergoods&servicesresidentialfixedinvestment

spendingonhousingunitsbyconsumersandlandlordsinventoryinvestment

thechangeinthevalueofallfirms’inventoriesU.S.Investment,2001Investmentvs.CapitalCapitalisoneofthefactorsofproduction.

Atanygivenmoment,theeconomyhasacertainoverallstockofcapital.Investmentisspendingonnewcapital.Investmentvs.CapitalExample(assumesnodepreciation):1/1/2002:

economyhas$500bworthofcapitalduring2002:

investment=$37b1/1/2003:

economywillhave$537bworthofcapitalStocksvs.Flows

stock flow aperson’swealth aperson’ssaving #ofpeoplewith #ofnewcollege

collegedegrees graduates thegovt.debt thegovt.budgetdeficitFlowStockMoreexamples:Governmentspending(G)Gincludesallgovernmentspendingongoodsandservices.Gexcludestransferpayments

(e.g.unemploymentinsurancepayments),becausetheydonotrepresentspendingongoodsandservices.Governmentspending,2001Netexports(NX=EX-IM)def:thevalueoftotalexports(EX)

minusthevalueoftotalimports(IM)AnimportantidentityY=C+I+G+NXwhere

Y=GDP=thevalueoftotaloutput

C+I+G+NX=aggregateexpenditureAquestionforyou:Supposeafirmproduces$10millionworthoffinalgoodsbutonlysells$9millionworth.Doesthisviolate（违背）the

expenditure=outputidentity?Whyoutput=expenditureUnsoldoutputgoesintoinventory,

andiscountedas“inventoryinvestment”… …whethertheinventorybuildupwasintentional（意愿的）ornot.Ineffect,weareassumingthat

firmspurchasetheirunsoldoutput.GDP:

Animportantandversatile（多方面的）conceptWehavenowseenthatGDPmeasurestotalincometotaloutputtotalexpenditurethesumofvalue-addedatallstages

intheproductionoffinalgoodsGNPvs.GDPGrossNationalProduct(GNP):

totalincomeearnedbythenation’sfactorsofproduction,regardlessofwherelocatedGrossDomesticProduct(GDP):

totalincomeearnedbydomestically-locatedfactorsofproduction,regardlessofnationality. (GNP–GDP)=(factorpaymentsfromabroad)

–(factorpaymentstoabroad)DiscussionQuestion:Inyourcountry,

whichwouldyouwant

tobebigger,GDPorGNP?Why?(GNP–GDP)asapercentageofGDP

forselectedcountries,1997.(GNP–GDP)asapercentageofGDP

forselectedcountries,1997.Realvs.NominalGDPGDPisthevalueofallfinalgoodsandservicesproduced.NominalGDPmeasuresthesevaluesusingcurrentprices.RealGDPmeasurethesevaluesusingthepricesofabaseyear.RealGDPcontrolsforinflationChangesinnominalGDPcanbedueto:changesinpriceschangesinquantitiesofoutputproducedChangesinrealGDPcanonlybeduetochangesinquantities,becauserealGDPisconstructedusing

constantbase-yearprices.Practiceproblem,part1ComputenominalGDPineachyearComputerealGDPineachyearusing2001asthebaseyear.200120022003PQPQPQgoodA$30900$311,000$361,050goodB$100192$102200$100205Answerstopracticeproblem,part1NominalGDPmultiplyPs&Qsfromsameyear

2001:$46,200=$30

900+$100

192

2002:$51,400

2003:$58,300RealGDPmultiplyeachyear’sQsby2001Ps

2001:$46,200

2002:$50,000

2003:$52,000=$30

1050+$100

205U.S.Real&NominalGDP,1967-2001GDPDeflatorTheinflationrateisthepercentageincreaseintheoveralllevelofprices.Onemeasureofthepricelevelis

theGDPDeflator,definedasPracticeproblem,part2Useyourpreviousanswerstocompute

theGDPdeflatorineachyear.UseGDPdeflatortocomputetheinflationratefrom2001to2002,andfrom2002to2003.Nom.GDPRealGDPGDP

deflatorinflation

rate2001$46,200$46,200n.a.200251,40050,000200358,30052,000Answerstopracticeproblem,part2Nom.GDPRealGDPGDP

deflatorinflation

rate2001$46,200$46,200100.0n.a.200251,40050,000102.82.8%200358,30052,000112.19.1%UnderstandingtheGDPdeflatorExamplewith3goodsForgoodi=1,2,3 Pit=themarketpriceofgoodiinmontht Qit=thequantityofgoodiproducedinmontht NGDPt=NominalGDPinmontht RGDPt=RealGDPinmonthtUnderstandingtheGDPdeflatorTheGDPdeflatorisaweightedaverageofprices.Theweightoneachpricereflects

thatgood’srelativeimportanceinGDP.Notethattheweightschangeovertime.WorkingwithpercentagechangesEX: Ifyourhourlywagerises5%

andyouwork7%morehours,

thenyourwageincomerisesapproximately12%.USEFULTRICK#1ForanyvariablesXandY, thepercentagechangein(X

Y

)

thepercentagechangeinX

+thepercentagechangeinYWorkingwithpercentagechangesEX: GDPdeflator=100

NGDP/RGDP. IfNGDPrises9%andRGDPrises4%,

thentheinflationrateisapproximately5%.USEFULTRICK#2 thepercentagechangein(X/Y

)

thepercentagechangeinX

thepercentagechangeinYChain-weightedRealGDPOvertime,relativepriceschange,sothebaseyearshouldbeupdatedperiodically.Inessence,“chain-weighted（环比－加权）RealGDP”updatesthebaseyeareveryyear.Thismakeschain-weightedGDPmoreaccuratethanconstant-priceGDP.Butthetwomeasuresarehighlycorrelated,andconstant-pricerealGDPiseasiertocompute……sowe’llusuallyuseconstant-pricerealGDP.OtherMeasuresofIncomeNNP=GNP-DepreciationNI=NNP-IndirectbusinesstaxesPI=NI-Corporateprofits-Socialinsurancecontributions-Netinterest+Dividends+Governmenttransferstoindividuals+PersonalinterestincomeDPI=PI-Personaltaxandnon-taxpayments=C+SConsumerPriceIndex(CPI)AmeasureoftheoveralllevelofpricesPublishedbytheBureauofLaborStatistics(BLS)Usedtotrackchangesinthe

typicalhousehold’scostoflivingadjustmanycontractsforinflation

(i.e.“COLAs”)allowcomparisonsofdollarfiguresfromdifferentyearsHowtheBLSconstructstheCPISurveyconsumerstodeterminecompositionofthetypicalconsumer’s“basket”ofgoods.Everymonth,collectdataonpricesofallitemsinthebasket;computecostofbasketCPIinanymonthequalsExercise:ComputetheCPIThebasketcontains20pizzasand

10compactdiscs(唱片).prices: pizza CDs2000 $10 $152001 $11 $152002 $12 $162003 $13 $15Foreachyear,computethecostofthebaskettheCPI(use2000asthebaseyear)theinflationratefromtheprecedingyear

costof inflation basket

CPI rate2000 $350 100.0 n.a.2001 370 105.7 5.7%2002 400 114.3 8.1%2003 410 117.1 2.5%answers:ThecompositionoftheCPI’s“basket”UnderstandingtheCPIExamplewith3goodsForgoodi=1,2,3 Ci=theamountofgoodiintheCPI’sbasket Pit=thepriceofgoodiinmontht Et=thecostoftheCPIbasketinmontht Eb=costofthebasketinthebaseperiodUnderstandingtheCPITheCPIisaweightedaverageofprices.Theweightoneachpricereflects

thatgood’srelativeimportanceintheCPI’sbasket.Notethattheweightsremainfixedovertime.Reasonswhy

theCPImayoverstateinflationSubstitutionbias:TheCPIusesfixedweights,

soitcannotreflectconsumers’abilitytosubstitutetowardgoodswhoserelativepriceshavefallen.Introductionofnewgoods:Theintroductionofnewgoodsmakesconsumersbetteroffand,ineffect,increasestherealvalueofthedollar.ButitdoesnotreducetheCPI,becausetheCPIusesfixedweights.Unmeasuredchangesinquality:

Qualityimprovementsincreasethevalueofthedollar,butareoftennotfullymeasured.TheCPI’sbiasTheBoskinPanel’s“bestestimate”:

TheCPIoverstatesthetrueincreaseinthecostoflivingby1.1%peryear.Result:theBLShasrefinedthewayitcalculatestheCPItoreducethebias（误差）.ItisnowbelievedthattheCPI’sbiasisslightlylessthan1%peryear.

Discussiontopic:IfyourgrandmotherreceivesSocialSecurity,howissheaffectedbytheCPI’sbias?WheredoesthegovernmentgetthemoneytopayCOLAstoSocialSecurityrecipients?IfyoupayincometaxesandSocialSecuritytaxes,howdoestheCPI’sbiasaffectyou?IsthegovernmentgivingyourgrandmothertoobigofaCOLA?Howdoesyourgrandmother’s“basket”differfromtheCPI’s?CPIvs.GDPdeflatorpricesofcapitalgoodsincludedinGDPdeflator(ifproduceddomestically)excludedfromCPIpricesofimportedconsumergoodsincludedinCPIexcludedfromGDPdeflatorthebasketofgoodsCPI:fixedGDPdeflator:changeseveryyearTwomeasuresofinflation16

14

12

10

8

6

4

2

0

-2Percentagechange194819531958196319681973Year19781983198819931998CPIGDPdeflatorCategoriesofthepopulationemployed

workingatapaidjobunemployed

notemployedbutlookingforajoblaborforce

theamountoflaboravailableforproducinggoodsandservices;allemployedplusunemployedpersonsnotinthelaborforce

notemployed,notlookingforwork.Twoimportantlaborforceconceptsunemploymentrate

percentageofthelaborforcethatisunemployedlaborforceparticipationrate（劳动力参工率）

thefractionoftheadultpopulation

that‘participates’inthelaborforceExercise:ComputelaborforcestatisticsU.S.adultpopulationbygroup,April2002 Numberemployed = 134.0million Numberunemployed = 8.6million Adultpopulation = 213.5millionUsetheabovedatatocalculatethelaborforcethenumberofpeoplenotinthelaborforcethelaborforceparticipationratetheunemploymentrateAnswers:data:E=134.0,U=8.6,POP=213.5laborforce

L=E+U=134.0+8.6=142.6notinlaborforce

NILF=POP

–L=213.5–142.6=70.9unemploymentrate

U/L=8.6/142.6=0.06or6.0%laborforceparticipationrate

L/POP=142.6/213.5=0.668

or

68.8%Exercise:ComputepercentagechangesinlaborforcestatisticsSupposethepopulationincreasesby1%thelaborforceincreasesby3%thenumberofunemployedpersonsincreasesby2%Computethepercentagechangesin thelaborforceparticipationrate:

theunemploymentrate:2%

1%EmployedworkershelpproduceGDP,whileunemployedworkersdonot.

Soonewouldexpect

anegativerelationshipbetweenunemploymentandrealGDP.Thisrelationshipisclearinthedata…Okun’sLawOkun’sLaw1951198419992000199319821975Changein

unemploymentrate10-3-2-10124386420-2Percentagechange

inrealGDPOkun’sLawstatesthataone-percentdecreaseinunemploymentisassociatedwithtwopercentagepointsofadditionalgrowthinrealGDPChapterSummaryGrossDomesticProduct(GDP)measuresbothtotalincomeandtotalexpenditureontheeconomy’soutputofgoods&services.NominalGDPvaluesoutputatcurrentprices;realGDPvaluesoutputatconstantprices.Changesinoutputaffectbothmeasures,butchangesinpricesonlyaffectnominalGDP.GDPisthesumofconsumption,investment,governmentpurchases,andnetexports.ChapterSummaryTheoveralllevelofpricescanbemeasuredbyeithertheConsumerPriceIndex(CPI),

thepriceofafixedbasketofgoodspurchasedbythetypicalconsumertheGDPdeflator,

theratioofnominaltorealGDPTheunemploymentrateisthefractionofthelaborforcethatisnotemployed.

Whenunemploymentrises,thegrowthrateofrealGDPfalls.slide96Inthischapteryouwilllearn:whatdeterminestheeconomy’stotaloutput/incomehowthepricesofthefactorsofproductionaredeterminedhowtotalincomeisdistributedwhatdeterminesthedemandforgoodsandserviceshowequilibriuminthegoodsmarketisachievedslide97OutlineofmodelAclosedeconomy,market-clearingmodelSupplysidefactormarkets(supply,demand,price)determinationofoutput/incomeDemandsidedeterminantsofC,I,andGEquilibriumgoodsmarketloanablefundsmarketslide98FactorsofproductionK= capital,

tools,machines,andstructuresusedinproductionL= labor,

thephysicalandmentaleffortsofworkersslide99TheproductionfunctiondenotedY=F(K,

L)showshowmuchoutput(Y)theeconomycanproducefrom

K

unitsofcapitalandL

unitsoflabor.reflectstheeconomy’sleveloftechnology.exhibitsconstantreturnstoscale.slide100Returnstoscale:areviewInitiallyY1

=F(K1

,

L1

)Scaleallinputsbythesamefactorz:

K2=zK1andL2=zL1 (Ifz=1.25,thenallinputsareincreasedby25%)Whathappenstooutput,Y2=F(K2

,

L2

)?Ifconstantreturnstoscale,Y2=zY1

Ifincreasingreturnstoscale,Y2>zY1

Ifdecreasingreturnstoscale,Y2<zY1

slide101Exercise:determinereturnstoscaleDeterminewhethereachofthefollowingproductionfunctionshasconstant,increasing,ordecreasingreturnstoscale:slide102AssumptionsofthemodelTechnologyisfixed.Theeconomy’ssuppliesofcapitalandlaborarefixedatslide103DeterminingGDPOutputisdeterminedbythefixedfactorsuppliesandthefixedstate

oftechnology:slide104Thedistributionofnationalincomedeterminedbyfactorprices,

thepricesperunitthatfirmspayforthefactorsofproduction.ThewageisthepriceofL

, therentalrateisthepriceofK.slide105Notation

W =nominalwageR =nominalrentalrateP =priceofoutputW

/P =realwage

(measuredinunitsofoutput)R

/P =realrentalrateslide106HowfactorpricesaredeterminedFactorpricesaredeterminedbysupplyanddemandinfactormarkets.Recall:Supplyofeachfactorisfixed.Whataboutdemand?slide107DemandforlaborAssumemarketsarecompetitive:

eachfirmtakesW,R,andPasgivenBasicidea:

Afirmhireseachunitoflabor

ifthecostdoesnotexceedthebenefit.cost =realwagebenefit =marginalproductoflaborslide108Marginalproductoflabor(MPL)def:

Theextraoutputthefirmcanproduceusinganadditionalunitoflabor(holdingotherinputsfixed):

MPL

=

F

(K,

L+1)

–

F

(K,

L)slide109Exercise:compute&graphMPLDetermineMPLateach

valueofLGraphtheproduction

functionGraphtheMPLcurvewithMPLonthe

verticalaxisand

Lonthehorizontalaxis

L Y

MPL 0 0 n.a. 1 10 ? 2 19 ? 3 27 8 4 34 ? 5 40 ? 6 45 ? 7 49 ? 8 52 ? 9 54 ? 10 55 ?slide110answers:slide111YoutputTheMPLandtheproductionfunctionLlabor1MPL1MPL1MPLAsmorelaborisadded,MPL

SlopeoftheproductionfunctionequalsMPLslide112DiminishingmarginalreturnsAsafactorinputisincreased,itsmarginalproductfalls(otherthingsequal).Intuition(直观):

LwhileholdingKfixedfewermachinesperworkerlowerproductivityslide113Checkyourunderstanding:Whichoftheseproductionfunctionshavediminishingmarginalreturnstolabor?slide114Exercise(part2)SupposeW/P=6.IfL=3,shouldfirmhiremoreorlesslabor?Why?IfL=7,shouldfirmhiremoreorlesslabor?Why?

L Y MPL

0 0 n.a. 1 10 10 2 19 9 3 27 8 4 34 7 5 40 6 6 45 5 7 49 4 8 52 3 9 54 2 10 55 1slide115MPLandthedemandforlaborEachfirmhireslabor

uptothepointwhereMPL=W/PUnitsofoutputUnitsoflabor,LMPL,LabordemandRealwageQuantityoflabordemandedslide116DeterminingtherentalrateWehavejustseenthatMPL

=W/PThesamelogicshowsthatMPK

=R/P

:diminishingreturnstocapital:MPK

asK

TheMPK

curveisthefirm’sdemandcurve

forrentingcapital.FirmsmaximizeprofitsbychoosingK

suchthatMPK=R/P

.slide117TheNeoclassicalTheory

ofDistributionstatesthateachfactorinputispaiditsmarginalproductacceptedbymosteconomistsslide118Howincomeisdistributed:totallaborincome=Ifproductionfunctionhasconstantreturnstoscale,thentotalcapitalincome=labor

incomecapital

incomenational

incomeslide119OutlineofmodelAclosedeconomy,market-clearingmodelSupplysidefactormarkets(supply,demand,price)determinationofoutput/incomeDemandsidedeterminantsofC,I,andGEquilibriumgoodsmarketloanablefundsmarketDONE

DONE

Next

slide120Demandforgoods&servicesComponentsofaggregatedemand:C=consumerdemandforg&sI=demandforinvestmentgoodsG=governmentdemandforg&s (closedeconomy:noNX)slide121Consumption,Cdef:disposableincomeistotalincomeminustotaltaxes:Y–TConsumptionfunction:C=C(Y–T) Showsthat(Y–T)

C

def:Themarginalpropensitytoconsume

isth