中级宏观经济学(英文版第3章)Intermediate Macroeconomics

$1500 each in 2003, what happened to GDP in 2003?
CPI v.s.GDP deflator
CPI may overstate inflation (sorry! not always )
When it really overstates inflation, comparing to the GDP deflator, we should look for reasons from where it differs from the GDP deflator, right?
What is the accounting profit? What is the economic profit? What is the intuition for their difference?
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2 people 2 spades
……
L or K MPL or MPK L or K
Production Function
Decreasing Returns to Scale (DRS)
e.g. Y L K
Intuition:
Q
Y
1 office 1 worker
1 office 2 workers
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D for Goods & Services
Y = C + I + G + NX Closed economy → NX = 0
Intermediate Macroeconomics
Lecture 3
Topics
Finish the assignment from last class Clarification for 4 questions from last class Demand for goods and services Equilibrium and the interest rate
1 firm 1 knowledge
Q
2 firms 1 knowledge
……
L or K MPL or MPK
L or K
Production Function
In real world, production function
function looks usual like
Y
Q
Q
MPL or MPK
So, r↑→ I ↓
D for Goods & Services
Government Purchasing (G)
T–G Budget surplus: T – G > 0 Budget deficit: T – G < 0 Budget is balanced: T – G = 0
D for Goods & Services
2. Investment and interest rate The investment function: I =I (r) r: real interest rate r is 1) the cost of borrowing
2) the opportunity cost of using one’s own funds
Assignment
Cobb-Douglas production function Y F (K , L) AK L1
1. What is MPL? 2. What is the relationship between labor
income and total income?
Assignment
A(1 )K L
AK L1
L
1
Inventories
In 2002, firm A produced 1000 pc. 800 sold at $1000 each, 200 become inventories.
1) What happened to GDP in 2002? 2) If the 200 inventories were sold at
政府消费13029
固定资本形成36813
居民消费 政府消费
投资
(存货增加648)
D for Goods & Services
1. Consumption Disposable income: Y – T How to spend disposable income? (C&S) Consumption function: C = C (Y - T)
than in the real world (due to technological improvement) 3. Imports have sky rocketing price
☆ ☆ Statistics bureaus change basket (types of goods and their weights) now and then
U.S. C
Japan
Y-T
Marginal propensity to consume (MPC): the amount of consumption changes when disposable income increases by one dollar
D for Goods & Services
C: consumption I: investment G: government purchasing NX: net export
D for Goods & Services
国民核算(亿元)
国内生产总值95933
支出法国内生产总值98618
居民消费45923
Demand for G & S (China, 2001)
1.50E+00 1.00E+00 5.00E-01 0.00E+00
CPI v.s. GDP Deflator (China)
CPI GDP
deflatorYear
3.00E+00 2.50E+00 2.00E+00 1.50E+00 1.00E+00 5.00E-01 0.00E+00
CPI v.s. GDP deflator (U.S.)
4.00E+00 2.00E+00 0.00E+00
Inflation (U.S.)
consumer prices
GDP deflator
year
CPI v.s.GDP deflator
3 differences between CPI & GDP deflator
Therefore, it might be 1. Basket has more expensive goods 2. Goods included in the basket have higher weights
L or K
…… 2 offices 1 worker
Q MPL or MPK
3 offices 1 worker
……
L or K
Production Function
❖ Increasing Returns to Scale (IRS)
e.g. Y L2 K 2
Q
Y
Intuition:
knowledge capital
Equilibrium
r
S Y C(Y T ) G
Eq’m r
Eq’m level of I
I(r) S, I
Equilibrium
Things that shift the savings curve 1) public saving
--- fiscal policy: changes in G or T
Consumption depends directly on the level of disposable income. The higher disposable income is, the greater consumption is.
D for Goods & Services
The relationship between disposable income and consumption
Production Function
--- many types/shapes Depends on …?
Q
L or K
Production Function
Constant Returns to Scale (CRS)
e.g. Y = L + K
Q
Y
Intuition:
1 person 1 spade Q
L or K
L or K
Economic profits v.s. accounting profits
For competitive firms: + accounting profits; 0 economic profits
e.g. Competitive firm A hires 10 workers, $100/worker; uses $100,000 capital; it produces 20,000 DVD players with p=$100.