Macroeconomics - Barro Chapter 1

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C h a p t e r 1Thinking About Macroeconomics

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Output, Unemployment, and Prices in U.S. History

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Output, Unemployment, and Prices in U.S. History

• Growth rate of real GDP for year t=

(( Yt− Yt−1)/ Yt−1)− 1

– Multiply by 100 to get the growth rate of real GDP in percent per year.

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Output, Unemployment, and Prices in U.S. History

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Output, Unemployment, and Prices in U.S. History

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Output, Unemployment, and Prices in U.S. History

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Output, Unemployment, and Prices in U.S. History

• Inflation rate for year t =

(( Pt− P t−1)/ Pt−1) − 1

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Output, Unemployment, and Prices in U.S. History

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Economic Models

• Endogenous variables are the ones that we want the model to explain.

• Exogenous variables are the ones that a model takes as given and does not attempt to explain.

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Economic Models

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Economic ModelsThe Coffee Market

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Economic ModelsThe Coffee Market

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Economic ModelsThe Coffee Market

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Economic ModelsThe Coffee Market

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Economic ModelsThe Coffee Market

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Economic ModelsThe Coffee Market

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Economic Models

• Disequilibrium a discrepancy between the quantities of labor demanded and supplied.– New Keynesian model, argues that some

prices are sticky and move only slowly to equate the quantities of goods demanded and supplied.

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Economic Models

• Equilibrium business-cycle model - basic market-clearing model of economic fluctuations