Introduction to Macroeconomics - Economics 241, Spring 2006, Scott Gilbert
Macroeconomics Part II: Long-Run Economic Performance
I. Introduction
1. long-run versus short-run macroeconomics
- long-run: trend, potential, efficiency, rationality, equilibrium, circular flow
- short-run: cycle, fluctuation, possible inefficiency or irrationality
disequilibrium, market failure, interruption of circular flow
2. long-run goals: economic progress, growth, improved opportunity
3. long-run macroeconomic models, an overview
- agents, markets, institutions
- production, exchange
- general equilibrium (multiple markets), circular flow, Say’s law
- innovation: increase in resources (ex: human capital, technology)
- government policy, reform
4. preview of basic and expanded versions of the long-run model
- basic model: 2 markets - goods and also factors of production,
2 types of active agents - firms and households
- expanded: multiple markets (goods, factors, financial, foreign)
active, explicit role of government
II. The Basic Long-Run Macroeconomic Model
1. production
- output, labor, labor productivity, aggregate production function
- effects on output of changes in labor and productivity: theory and examples
2. labor market
- equilibrium in the labor market
- effects on wage & employment of changes in labor demand and labor supply
3. circular flow
- Say’s law, general equilibrium, changes in rate of circular flow
