mankiw8e-chap01.pdfVIP

MACROECONOMICS ? 2015 Worth Publishers, all rights reserved PowerPoint ? Slides by Ron Cronovich N. Gregory Mankiw Fall 2014 update The Science of Macroeconomics 1 IN THIS CHAPTER, YOU WILL LEARN: ? about the issues macroeconomists study ? about the tools macroeconomists use ? some important concepts in macroeconomic analysis 1 2CHAPTER 1 The Science of Macroeconomics Important issues in macroeconomics ? What causes recessions? What is “government stimulus” and why might it help? ? How can problems in the housing market spread to the rest of the economy? ? What is the government budget deficit? How does it affect workers, consumers, businesses, and taxpayers? Macroeconomics, the study of the economy as a whole, addresses many topical issues, e.g.: 3CHAPTER 1 The Science of Macroeconomics Important issues in macroeconomics ? Why does the cost of living keep rising? ? Why are so many countries poor? What policies might help them grow out of poverty? ? What is the trade deficit? How does it affect the country’s well-being? Macroeconomics, the study of the economy as a whole, addresses many topical issues, e.g.: $0 $10,000 $20,000 $30,000 $40,000 $50,000 1 9 0 0 1 9 1 0 1 9 2 0 1 9 3 0 1 9 4 0 1 9 5 0 1 9 6 0 1 9 7 0 1 9 8 0 1 9 9 0 2 0 0 0 2 0 1 0 U.S. Real GDP per capita (2009 dollars) Great Depression World War II First oil price shock Second oil price shock 9/11/2001 World War I Financial crisis -15 -10 -5 0 5 10 15 20 25 1 9 0 0 1 9 1 0 1 9 2 0 1 9 3 0 1 9 4 0 1 9 5 0 1 9 6 0 1 9 7 0 1 9 8 0 1 9 9 0 2 0 0 0 2 0 1 0 U.S. Inflation Rate (% per year) Great Depression First oil price shock Second oil price shock Financial crisis World War I 05 10 15 20 25 30 1 9 0 0 1 9 1 0 1 9 2 0 1 9 3 0 1 9 4 0 1 9 5 0 1 9 6 0 1 9 7 0 1 9 8 0 1 9 9 0 2 0 0 0 2 0 1 0 U.S. Unemployment Rate (% of labor force) Great Depression Financial crisisWorld War II World War I Oil price shocks 7CHAPTER 1 The Science of Macroeconomics Economic models …are