Macroeconomics (GADE) 2023-2024

Unit 1
Introduction
Objectives:
• To analyze the business cycle.
• Short-run and long-run determinants of income.
Bibliography: MANKIW chap. 1 and 10.

PART 1. EXERCISES
1. Suppose the Central Bank reduces the money supply by 3%.
a) What is the impact of this measure on the aggregate demand curve?
b) How does it affect the production level and the price level in the short run and the long
run?
c) According to Okun's law, what is the effect on unemployment in the short run and in
the long run?

2. Central bank’s goals and its response to shocks: Suppose that central bank A is only
interested in keeping the price level stable and central bank B is interested in maintaining
output and employment at their natural rates. Explain how each central bank would
respond to an exogenous rise in the oil price (shift the sort run supply curve upward).
Macroeconomics (GADE) 2023-2024

PART 2. READINGS
1. In World Economic Outlook Update - July 2023 (imf.org), published in July 2023, the
International Monetary Fund describes the current state of the world economy. Based
on your reading, briefly answer the following questions:
a) What are the growth projections for 2023 and 2024? Do they represent a change
with respect to the growth experienced in 2022?
b) What are the main unfavorable factors for global growth according to the IMF?
c) According to the report, what should be the priorities of governments and central
banks in the near future? Point out some measures that, according to the report,
could be implemented if tensions in the markets materialized.

2. Look at the main indicators of the Spanish economy based on the report published on
the FUNCAS website dedicated to the macroeconomic situation (100 indicators).
100 indicators - Funcas

Look at the main indicators or EU countries on Eurostat web (for example, inflation
rate and unemployment rate map visualization)

3. Browse the INE website (https://www.ine.es) and analyze the main indicators of the
labor market, price index and growth rate.

PART 3. READINGS (“homework”, candidate reading for the multiple-choice test)

The last press release from the National Institute of Statistics (published on July 28th,
2023) shows a preview of the main aggregates of the Spanish economy in the second
quarter of 2023. After reading it, briefly answer the following questions:
a) What has been the evolution in terms of production in 2023 compared to previous
years?
b) What is the contribution of national demand to year-on-year GDP growth? And
the contribution of external demand?
c) How has employment evolved in 2023? Has it evolved in the same way in
different sectors?