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Makro 1
Makro 1
Makro 1
CHAPTER
N. GREGORY MANKIW
PowerPoint® Slides by Ron Cronovich
© 2007 Worth Publishers, all rights reserved
Learning Objectives
First oil
30,000
price shock
long-run upward trend…
20,000
Great
Depression Second oil
10,000
price shock
World War II
0
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
CHAPTER 1 The Science of Macroeconomics slide 4
U.S. inflation rate
(% per year)
25
20
15
10
-5
-10
-15
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
CHAPTER 1 The Science of Macroeconomics slide 5
U.S. unemployment rate
(% of labor force)
30
25
20
15
10
0
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000
CHAPTER 1 The Science of Macroeconomics slide 6
Why learn macroeconomics?
1. The macroeconomy affects society’s well-being.
3
3
1
2
1 -1
0
-3
-1
-5
-2
-3 -7
1965 1970 1975 1980 1985 1990 1995 2000 2005
1 The Science
unemployment
CHAPTER rate ofinflation-adjusted
Macroeconomics mean wage (right scale) slide 8
Why learn macroeconomics?
3. The macroeconomy affects politics.
Unemployment & inflation in election years
year U rate inflation rate elec. outcome
1976 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% Bush I (R)
1992 7.5% 3.0% Clinton (D)
1996 5.4% 3.3% Clinton (D)
2000 4.0% 3.4% Bush II (R)
2004 5.5% 3.3% Bush II (R)
CHAPTER 1 The Science of Macroeconomics slide 9
Economic models
demand equation: P
Price
d
Q = D (P ,Y ) of cars
supply equation: P
Price
s
Q = S (P , Ps ) of cars S
P
Price
of cars S
equilibrium
price
D
Q
Quantity
of cars
equilibrium
quantity
An increase in income
increases the quantity P2
of cars consumers P1
demand at each price… D2
D1
Q
…which increases Q1 Q2
Quantity
the equilibrium price of cars
and quantity.
An increase in Ps
reduces the quantity of P2
cars producers supply P1
at each price…
D
…which increases the Q
Q2 Q 1
market price and Quantity
of cars
reduces the quantity.