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    Economics 302 Intermediate Macroeconomic Intermediate Macroeconomic Theory and Policy

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    tai2000
    This document provides an outline and overview of the lecture topics for Economics 302 Intermediate Macroeconomic Theory and Policy. The lecture will recap the Keynesian model and define key terms like parameters, endogenous and exogenous variables, and autonomous spending. It will then cover fiscal policy like a lump sum tax cut and discuss multipliers. Specifically, it will examine how changes in government spending and tax rates affect aggregate output. The lecture will also introduce import and export functions to model net exports more realistically. It provides estimates of parameter values used to calculate the multiplier.

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    Economics 302 Intermediate Macroeconomic Intermediate Macroeconomic Theory and Policy

    Uploaded by

    tai2000
    37 views16 pages
    This document provides an outline and overview of the lecture topics for Economics 302 Intermediate Macroeconomic Theory and Policy. The lecture will recap the Keynesian model and define key terms like parameters, endogenous and exogenous variables, and autonomous spending. It will then cover fiscal policy like a lump sum tax cut and discuss multipliers. Specifically, it will examine how changes in government spending and tax rates affect aggregate output. The lecture will also introduce import and export functions to model net exports more realistically. It provides estimates of parameter values used to calculate the multiplier.

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    This document provides an outline and overview of the lecture topics for Economics 302 Intermediate Macroeconomic Theory and Policy. The lecture will recap the Keynesian model and define key terms like parameters, endogenous and exogenous variables, and autonomous spending. It will then cover fiscal policy like a lump sum tax cut and discuss multipliers. Specifically, it will examine how changes in government spending and tax rates affect aggregate output. The lecture will also introduce import and export functions to model net exports more realistically. It provides estimates of parameter values used to calculate the multiplier.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    37 views16 pages

    Economics 302 Intermediate Macroeconomic Intermediate Macroeconomic Theory and Policy

    Uploaded by

    tai2000
    This document provides an outline and overview of the lecture topics for Economics 302 Intermediate Macroeconomic Theory and Policy. The lecture will recap the Keynesian model and define key terms like parameters, endogenous and exogenous variables, and autonomous spending. It will then cover fiscal policy like a lump sum tax cut and discuss multipliers. Specifically, it will examine how changes in government spending and tax rates affect aggregate output. The lecture will also introduce import and export functions to model net exports more realistically. It provides estimates of parameter values used to calculate the multiplier.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 16

    Economics 302 Intermediate Macroeconomic Theory and Policy

    (Fall 2010)

    Instructor: Prof. Menzie Chinn


    Lecture 4 Monday September 20 Monday, 20, 2010

    Outline
    Overview/Recap Definitions M lti li Multipliers What about taxes, transfers? Imports, Exports

    Overview
    We want to build up a general model where supply and demand determine output and (over time) price level output, level. To begin with, we simplify by: - Holding H ldi th the price i l level l constant t t( (so demand completely determines output) - Ignore the financial side of the economy

    Recap: the Keynesian Model

    Definitions
    Parameters: relate the behavior of two variables Endogenous variables: variables determined within the system of equations Exogenous E variables: i bl variables i bl determined outside the system of equations ti Autonomous spending: a0 , IN0 , GO0 , g0

    Fiscal Policy (Lump Sum Tax Cut)

    Multipliers
    Y0 = [a0 bTA0 + IN 0 + GO0 + g 0 ] Y = [a bTA + IN + GO + g ] Y = GO Y = (bTA)
    ==> Y / GO = ==>Y / TA = b

    Multipliers (II)
    A Y = t + [ A0 ]t t t
    1 (b) = (1) t 1 b(1 t ) + m
    2

    Y = [ A0 ]t = b( 2 )[ A0 ]t t
    Y = b( 2 )[ A0 ] t

    Fiscal Policy Policy, Tax Rate Cut

    (corrected 9/15)

    Estimates of Multipliers

    Import Function
    A more realistic net exports function imports?
    16,000 14,000 12,000 10 000 10,000 8,000 6,000 4 000 4,000 75 80 85 90 95 00 05 10 GDP (Ch.2005$) [left axis] Imports (Ch.2005$) [right axis]

    X = g 0 mY
    2,400 2,000 1,600 1 200 1,200 800 400 0

    Source: BEA, 10Q2 BEA 2nd release

    Export Function?
    120 110 100 90 80 70 60 50 40 30 75 80 85 90 95 00 05 10 Rest-of-World GDP Index [left axis] 2,000 1 800 1,800 1,600 1 400 1,400 1,200 1,000 1 000 Exports (Ch.2005$) 800 [right axis] 600 400 200

    Source: BEA, 10Q2 GDP 2nd release; Federal Reserve Board; Economist

    Parameter E ti t for Estimates f the Multiplier p


    b(1-t) = 0.73 m = 0.23

    1 1 b(1 t ) + m 1 = 1 0.73 + 0.23 =2

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