Section notes for ECON 402, Intermediate Macroeconomics, with Professor Chris House
Plotting, two-period budget constraints, comparative statics with the intertemporal budget constraint, agents can always consume their endowment, not being allowed to borrow, indifference curves, derivatives, optimization
Here are the notes for section 2. A few take-aways:
Saving supply and saving demand determine the equilibrium rate of interest. Shifters of supply and demand are discussed. National accounting requires that \(Y_1 = C_1 + I_1\), so \(S_1 > 0\).
Valuing a job, valuing a job with wage growth, valuing a job with a finite work horizon, PIH with permanent and transitory fluctuations, neoclassical production, valuing a unit of capitl.
Precautionary saving in the face of uncertainty, computing expected values, expection, St. Petersburg paradox, concavity and risk aversion, an expanded answer to problem 5 on Midterm Exam 1
Neoclassical production, returns to scale, the final-good-producing firm makes no profits in equilibrium, the Solow model as a dynamic general-equilibrium model, Solow dynamics with population growth, growth rates of capital per worker.
You may also find this slidedeck on the fundamentals of asset pricing helpful.
The AK model, the AK model with diminishing returns: each new unit of capital added to the economy is slightly less productive than the last—eventually investment falls to the level of depreciation, the Solow model with population growth and technological change: \[ \begin{align*} g_K = g_Y = g_C = g_I = (1+g_A)(1+n), \end{align*}\] enter through the narrow gate; for the gate is wide and the road is easy that leads to destruction—the golden rule: in steady state where \(K_{t+1} = K_t = K\), \[ \begin{align*} K &= (1-\delta)K + I = (1-\delta)K + Y - C = (1-\delta)K + AK^{\alpha} - C \\ \therefore C &= \delta K + AK^{\alpha} \\ \therefore \frac{\partial C}{\partial K} &= 0 \implies \delta = \text{MPK}, \end{align*} \] Solow with human capital from section 12.2 of the House Lecture notes
Steady-state \(K^{\star}\) with taxes, potential for tax policy to explain cross-country differences in output, wages when \(N_t = 1\), wages after a tax cut, influx of immigrants
Investment function, \(I(r)\); deriving the IS curve; how fiscal policy shifts the IS curve; supply and demand of real balances; deriving the LM curve; how monetary policy shifts the LM curve; IS–LM as a theory of aggregate demand; expansionary monetary policy; expansionary fiscal policy
Updward-sloping short-run aggregate supply, adjustment of output via the short-run aggregate supply function, the effects of a monetary expansion in the IS–LM/AD–AS framework, the effects of an increase in \(G\) in the IS–LM/AD–AS framework, \(Y = C + I + G + NX\), \(S = I + NX\), opening trade with an economy featuring low \(K\), borrowing from abroad, increase in \(G\)
\(\star\) The notes for section 10 were updated 4/14/2018.
Monetary neutrality, \(r = r^{\star}\) in a small open economy, the goods and services market and the IS\(^{\star}\) curve, the nominal exchange rate, the money market and the LM\(^{\star}\) curve, fixed vs floating exchange rates, example: monetary policy and floating exchange rates, the monetary transmission mechanism under floating exchange rates, example: fiscal expansion under floating exchange rates, example: trade policy under floating exchange rates, example: fixed exchange rates and fiscal policy, example: a monetary expansion under fixed exchange rates, devaluation, thanks
Here is the slide deck presented in the review session on 4/20, which corrected a few typos and added a few slides on the second midterm
Figures for the minimum-wage question on the practice final