chapter 3 _macro-economics

1、Chapter 3THE MACRO-ECONOMICENVIRONMENTLearning objectiveslA4Topic listlThe structure and objectives of the economylFactors which affect the economylThe determination of national incomelThe business cyclelInflation and its consequences lUnemployment lThe objective of economic growthlGovernment polici

2、es for managing the economylFiscal policylMonetary policylThe balance of payments What is macro-economics It is the study the aggregated effects of the decisions of individual economic units (such as households or businesses). It looks at a complete national economy, or the international economic sy

3、stem as a whole.宏觀經(jīng)濟(jì)學(xué)主要研究整個(gè)國民經(jīng)濟(jì)的經(jīng)濟(jì)行為，涉及的內(nèi)容是整個(gè)社會(huì)的價(jià)格水平、總產(chǎn)量、就業(yè)水平和其它經(jīng)濟(jì)總量的決定。1.1 Income and expenditure flows1.2 withdrawals and injections into the circular flow of incomeWithdrawals : savings, taxation, import expenditureInjections : investment, government spending, export income2. Factors which affect

4、 the economy 2.1 the multiplier in the national economy 2.2 aggregate supply and demand 2.2.1 aggregate demand 2.2.2 aggregate supply 2.2.3 a shift in aggregate demandNational income Aggregate demand (AD) = total planned or desired consumption demand in the economy for consumer goods and services an

5、d also for capital goods.Total level of demand = + consumption + government expenditure + investment + net gains from international trade (exports-imports)3 the determination of national income3.1 aggregate demand and supply equilibrium3.2 full-employment national income3.3 inflationary gap3.4 defla

6、tionary gap3.5 stagflation3.6 summary Aggregate demand and supply equilibrium l Full-employment national income ( Ideal equilibrium)AS=AD, full employment, without any inflationary gap l Inflationary gap - Resources (fully employed ) - Demand (Increase) - price level changes, no variations in real o

7、utputl Deflationary gap -Unemployment of resources -any change in demand will affect output -fairly constant price - actual national income is below full employment national income.l Stagflationunacceptably high unemployment unacceptable high inflation, National income fell A RecessionThe business c

8、ycle l It is the continual sequence of rapid growth in national income, followed by a slow-down in growth and then a fall in national income. After this recession comes growth again, which peaks, followed again by recessionl Government will seek to stabilize the system and avoid wide fluctuations. C

9、 Recovery D Boom Depression BOutput Time Recession lDemand lInvestment lInventory levellProductionlEmploymentlBusiness failurelGeneral price levellConfidence (diminished)Depression lRevenue lDemandlStocklInvestmentlKnock on effectlRecovery can be slow to beginlConfidenceRecovery lConfidence (returns

10、)lOutput, employment, incomelDemandlProfitlAverage price (constant, rise slowly)lNew technologyBoom lOutput lDemandlCapacity, labor (fully utilized)lBottle neckslPriceslProfitable, few firms face loseslExpectations (optimistic)lInvestment (high)Inflation It is the name given to an increase in price

11、level generally.It is also manifest in the decline in the purchasing power of money.Problems of inflation lRedistribution of income and wealthlBalance of payments effectslUncertainty of the value of moneylPrice uncertaintylResource cost of changing priceslHarmful to growth and investmentIndex Goods

12、and services are grouped into a single price index in order to measure how the real value of money is changing.Based on a chosen basket of items, the resulting consumer price index can be used for various purpose.l CPI (consumer price index, excluding most housing costs)l RPI (retail prices index, i

13、ncluding housing costs)l RPIX (excluding mortgage payments and some other elements)l RPIY (further excluding sales tax)CauseslDemand pull factorslCost push factorslImport cost factorslExpectations create itlIncrease in the money supply Unemployment The rate of unemployment Number of unemployment= To

14、tal workforce Flows into unemploymentlMembers of the working labor force becoming unemploymentlPeople out of the labor force joining the unemployed Consequence of unemploymentlLoss of output - total NI lLoss of human capital (skill)lInequalities in income distributionlSocial costs (personal sufferin

15、g, distress, crime)lIncreased burden of welfare paymentsCategories lReal wage unemploymentlFrictional (short-term)lSeasonal (short-term)lStructural (long-term)lTechnological (long-term)lCyclical or demand-deficient (long-term)Cyclical unemployment “為什么我們不生火？” “因?yàn)闆]有煤” “為什么我們沒有煤？” “因?yàn)楦赣H失業(yè)了。” “為什么父親失業(yè)了

16、？” “因?yàn)槊禾嗔??！?1931年的故事 Government employment policies lSpend money directly on jobslEncouraging private sector growthlEncouraging traininglOffering grant assistance in key regional areaslEncouraging labor mobilitylRestricting trade union negotiating strengthlAbolishing minimum wage regulations Econom

17、ic growth measured by increases in the real gross national product (GNP) per head of the population.Actual economic growth is the annual % increase in national output, which typically fluctuates with the trade cycle.lTechnological progress-capital saving, neutral, labor savinglTerms of international

18、 tradePotential economic growthGrowth in demand lNew investment (sustained economic growth)lNatural resourceslLaborlCapital Sustained economic growth should move in step, but they will depend on: Advantages of growthlHigher income per headlHigher level of consumptionlBetter standard of livinglWelfar

19、e provision without creating intolerable tax burdens Disadvantages of growthlFaster use of natural resourceslCreation of pollutionlStructural unemploymentlNeeds higher levels of saving to be able to invest more -cut consumptiondeter growth Macroeconomic policy objectivesMacroeconomic policy objectiv

20、esEconomicgrowthStable pricesBalance Full employmentGovernment spending/expenditureGovernments spending must be allocated between departments and functions: Health , social services, education, transport, defence, grants to industry Interest on borrowings, repayments of capital expenditure Materials

21、, suppliers and servicesCapital equipment Benefits and pensions .Wages and salaries to employeesImpact of gov. tax, spending decisions to company l Government Expenditure - suppliers to the government - knock-on effect, more companies involvedl Tax - consumers purchasing power - profits, companies a

22、fter-tax return on investmentl Public sector investment - variety of objectives - time scale, less quantifiable economic benefitsEconomic planning Economic planning is lesser scale.Government -director of economic activity. -enable of private sector activity -corrector of market imperfections - more

23、Government influences over organisation lSurvey :See diagram lInfluence over commercial decisionslInfluence over operational decisions Fiscal policy It provides a method of managing aggregate demand in the economy.Elements of fiscal policy Expenditure planning Revenues raising especially taxation, d

24、irect charges Borrowing higher PSNCR, PSBRBudget ABCABIncome expendituresurplusnegative PSNCRExpenditure incomedeficitPSNCRExpenditure =incomebalanceStimulate demandSpending (direct)Taxation (indirect)Tax Borrowing Spending Borrowing Budget surplus / deficitPolicy instrument: expenditure changes, ta

25、x changesOptions: lexp. taxes = stimulate demand, higher PSNCRlexp. taxes = reduced demand, reduced PSNCRlexp. taxeslExp. taxesFunctions of taxation Revenue raiser Discourages certain activitiesTo cover social costs of some products Redistribute income and wealthProtection from foreign competition S

26、tabilizing effectTAXATIONDirect or indirectAims for:FlexibilityEfficiencyNon-distorting effectsMonetary policy influence aggregate demand and control inflationMoney Supply InterestRate ExchangeRates Credit Control p Increase in money supply will raise priceand incomep the price of moneypAssumes a re

27、lationship (interest rates, expenditure, inflation rate)pEffective and rapid mechanismAffects price of a countrys exportsDepends on domestic rate of inflation and interest ratesp RestrictionsOn bank lending to reduce demand Interest rateInterest rateExpenditure Inflation rateInterest rate price inve

28、stment - profit inventoryIR - exchange rate - import export -preventing import cost push inflationCredit control IR (low)Credit control (absence)IR(high) deterrent to borrowing reduce spendingIR (high) value of sterling (higher) import export Protect the balance of payment, prevent import-cost-push inflationIR(high) capital inflow finance payments deficitCredit control (strict) lending demand Stimulate Bank lendingIncreas