宏观经济学英文版复习提纲.doc

1、Definition of Terms (54, 20 points)Chapter 11.MacroeconomicsMacroeconomics is the study of the economy as a whole, including growth in incomes, changes in prices, and the rate of unemployment. Chapter 22.Gross domestic product (GDP)Gross domestic product (GDP) measures the income of everyone in the economy and, equivalently, the total expenditure on the economys output of goods and services.3.Value added The value added of a firm equals the value of the firms output less the value of the intermediate goods that the firm purchases.4.Real GDPReal GDP is the value of goods and services measured using a constant set of prices. 5.GDP deflatorThe GDP deflator is the ratio of nominal GDP to real GDP. It reflects whats happening to the overall level of prices in the economy.6.Consumer price index (CPI)The consumer price index (CPI) measures the price of a fixed basket of goods and services purchased by a typical consumer. It measures the overall level of prices.7.Unemployment rateThe unemployment rate shows what fraction of those who would like to work do not have a job. Unemployment Rate = Number of Unemployed/Labor Force100.8.Labor-force participation rateThe labor-force participation rate shows the fraction of adults who are working or want to work. Labor-Force Participation Rate = Labor Force / Adult Population 100.Chapter 39.Disposable incomeWe define income after the payment of all taxes, Y T, to be disposable income.10.Marginal propensity to consume(MPC)The marginal propensity to consume (MPC) is the amount by which consumption changes when disposable income increases by one dollar. The MPC is between zero and one.11.Real interest rateThe real interest rate is the nominal interest rate corrected for the effects of inflation.Chapter 412.InflationThe overall increase in prices is called inflation,13.HyperinflationHyperinflation is often defined as inflation that exceeds 50 percent per month, which is just over 1 percent per day.14.MoneyMoney is the stock of assets that can be readily used to make transactions.15.Fiat moneyMoney that has no intrinsic value is called fiat money because it is established as money by government decree, or fiat.16.Commodity moneyMost societies in the past have used a commodity with some intrinsic value for money.This type of money is called commodity money.17.Money supplyThe quantity of money available in an economy is called the money supply.18.Quantity equationThe link between transactions and money is expressed in the following equation, called the quantity equation: Money Velocity = Price Transactions M V = P T.19.Income velocity of moneyThe income velocity of money tells us the number of times a dollar bill enters someones income in a given period of time.20.Real money balancesM/P is called real money balances. Real money balances measure the purchasing power of the stock of money21.SeigniorageThe revenue raised by the printing of money is called seigniorage.22.Fisher equation and Fisher effectThe nominal interest rate is the sum of the real interest rate and the inflation rate: i = r +. The equation written in this way is called the Fisher equationAccording to the quantity theory, an increase in the rate of money growth of 1 percent causes a 1 percent increase in the rate of inflation. According to the Fisher equation, a 1 percent increase in the rate of inflation in turn causes a 1 percent increase in the nominal interest rate. The one-for-one relation between the inflation rate and the nominal interest rate is called the Fisher effect.23.Shoeleather costsThe inconvenience of reducing money holding is called the shoeleather cost of inflation, because walking to the bank more often causes ones shoes to wear out more quickly24.Menu costsHigh inflation induces firms to change their posted prices more often. These costs are called menu costs.25.Classical dichotomyClassical theory allows us to study how real variables are determined without any reference to the money supply. This theoretical separation of real and nominal variables is called the classical dichotomy.26.Monetary neutralityIn classical economic theory, changes in the money supply dont influence real variables. This irrelevance of money for real variables is called monetary neutrality.Chapter 627.Natural rate of unemploymentNatural rate of unemployment is the average rate of unemployment around which the economy fluctuates.28.Frictional unemploymentThe unemployment caused by the time it takes workers to search for a job is called frictional unemployment.29.Wage rigidityWage rigidity is the failure of wages to adjust to a level at which labor supply equals labor demand.30.Structural unemploymentThe unemployment resulting from wage rigidity and job rationing is called structural unemployment.31.Efficiency wagesEfficiency-wage theories propose a third cause of wage rigidity in addition to minimum-wage laws and unionization. These theories hold that high wages make workers more productive.Chapter 732.Steady stateAt k*, k = 0,so the capital stock k and output f(k) are steady over time (rather than growing or shrinking). We therefore call k* the steady-state level of capital. The steady state represents the long-run equilibrium of the economy.33.Golden Rule level of capitalThe steady-state value of k that maximizes consumption is called the Golden Rule level of capital and is denoted k*gold.Chapter 834.Endogenous growth theoryModern theories of endogenous growth attempt to explain the rate of technological progress, which the Solow model takes as exogenous. Chapter 935.Okuns lawBecause employed workers help to produce goods and services and unemployed workers do not, increases in the unemployment rate should be associated with decreases in real GDP. This negative relationship between unemployment and GDP is called Okuns law, Okuns law says that 1 percentage point of unemployment translates into 2 percentage points of GDP.36.Aggregate demandAggregate demand (AD) is the relationship between the quantity of output demanded and the aggregate price level. In other words, the aggregate demand curve tells us the quantity of goods and services people want to buy at any given level of prices.37.Aggregate supplyAggregate supply (AS) is the relationship between the quantity of goods and services supplied and the price level.38.Demand shocksA shock that shifts the aggregate demand curve is called a demand shock.39.Supply shocksA shock that shifts the aggregate supply curve is called a supply shock.40.Stabilization policyEconomists use the term stabilization policy to refer to policy actions aimed at reducing the severity of short-run economic fluctuations.Chapter 1041.IS curveIS stands for “investment and “saving, and the IS curve represents the negative relationship between the interest rate and the level of income that arises from equilibrium in the market for goods and services.42.LM curveLM stands for “liquidity and “money, and the LM curve represents the positive relationship between the interest rate and the level of income that arises from equilibrium in the market for real money balances.43.Keynesian crossThe Keynesian cross is a basic model of income determination. It takes fiscal policy and planned investment as exogenous and then shows that there is one level of national income at which actual expenditure equals planned expenditure.Chapter 1344.Phillips curveThe Phillips curve in its modern form states that the inflation rate depends on three forces: Expected inflation The deviation of unemployment from the natural rate, called cyclical unemployment Supply shocks.These three forces are expressed in the following equation: = E (u un) +vInflation= Expected Inflation (Cyclical Unemployment ) + Supply Shock,whereis a parameter measuring the response of inflation to cyclical unemployment.There is a minus sign before the cyclical unemployment term: other things equal, higher unemployment is associated with lower inflation45.Adaptive expectationsA simple and often plausible assumption is that people form their expectations of inflation based on recently observed inflation. This assumption is called adaptive expectations.46.Demand-pull inflationThe second term, (u un), shows that cyclical unemploymentthe deviation of unemployment from its natural rateexerts upward or downward pressure on inflation. Low unemployment pulls the inflation rate up. This is called demand-pull inflation because high aggregate demand is responsible for this type of inflation.47.Cost-push inflationThe third term, v, shows that inflation also rises and falls because of supply shocks. An adverse supply shock, such as the rise in world oil prices in the 1970s, implies a positive value of v and causes inflation to rise. This is called cost-push inflation because adverse supply shocks are typically events that push up the costs of production.48.Sacrifice ratioThe sacrifice ratio is the percentage of a years real GDP that must be forgone to reduce inflation by 1 percentage point. Although estimates of the sacrifice ratio vary substantially, a typical estimate is about 5: for every percentage point that inflation is to fall, 5 percent of one years GDP must be sacrificed.49.Rational expectationsAn alternative approach is to assume that people have rational expectations. That is, we might assume that people optimally use all the available information, including information about current government policies, to forecast the future.50.Natural-rate hypothesisThe natural-rate hypothesis is summarized in the following statement: Fluctuations in aggregate demand affect output and employment only in the short run. In the long run, the economy returns to the levels of output, employment, and unemploymentdescribed by the classical mode51.HysteresisSome economists have pointed out a number of mechanisms through which recessionsmight leave permanent scars on the economy by altering the natural rate of unemployment. Hysteresis is the term used to describe the long-lasting influence of history on the natural rate.2、Gap Filling(201, 20 points)Summary in all chapters that we already studied NOTE: I will give you a word list, you choose the word from the list and fill outChapter 11. Macroeconomics is the study of the economy as a whole, including growth in incomes, changes in prices, and the rate of unemployment. Macroeconomists attempt both to explain economic events and to devise policies to improve economic performance.2. To understand the economy, economists use modelstheories that simplify reality in order to reveal how exogenous variables influence endogenous variables. The art in the science of economics is in judging whether a model captures the important economic relationships for the matter at hand. Because no single model can answer all questions, macroeconomistsuse different models to look at different issues.3. A key feature of a macroeconomic model is whether it assumes that prices are flexible or sticky. According to most macroeconomists, models with flexible prices describe the economy in the long run, whereas models with sticky prices offer a better description of the economy in the short run.4. Microeconomics is the study of how firms and individuals make decisions and how these decisionmakers interact. Because macroeconomic events arise from many microeconomic interactions, all macroeconomic models must be consistent with microeconomic foundations, even if those foundations are only implicit.Chapter 21. Gross domestic product (GDP) measures the income of everyone in the economy and, equivalently, the total expenditure on the economys output of goods and services.2. Nominal GDP values goods and services at current prices. Real GDP values goods and services at constant prices. Real GDP rises only when the amount of goods and services has increased, whereas nominal GDP can rise either because output has increased or because prices have increased.3. GDP is the sum of four categories of expenditure: consumption, investment, government purchases, and net exports.4. The consumer price index (CPI) measures the price of a fixed basket of goods and services purchased by a typical consumer. Like the GDP deflator, which is the ratio of nominal GDP to real GDP, the CPI measures the overall level of prices.5. The labor-force participation rate shows the fraction of adults who are working or want to work. The unemployment rate shows what fraction of those who would like to work do not have a job.Chapter 31. The factors of production and the production technology determine the economys output of goods and services. An increase in one of the factors of production or a technological advance raises output.2. Competitive, profit-maximizing firms hire labor until the marginal product of labor equals the real wage. Similarly, these firms rent capital until the marginal product of capital equals the real rental price. Therefore, each factor of production is paid its marginal product. If the production function has constant returns to scale, then according to Eulers theorem, all output is used to compensate the inputs.3. The economys output is used for consumption, investment, and government purchases. Consumption depends positively on disposable income. Investment depends negatively on the real interest rate. Government purchases and taxes are the exogenous variables of fiscal policy.4. The real interest rate adjusts to equilibrate the supply and demand for the economys outputor, equivalently, the supply of loanable funds (saving) and the demand for loanable funds (investment). A decrease in national saving, perhaps because of an increase in government purchases or a decrease in taxes, reduces the equilibrium amount of investment and raises the interest rate. An increase in investment demand, perhaps because of a technological innovation or a tax incentive for investment, also raises the interest rate. An increase in investment demand increases the quantity of investment only if higher interest rates stimulate additional saving.Chapter 41. Money is the stock of assets used for transactions. It serves as a store of value, a unit of account, and a medium of exchange. Different sorts of assets are used as money: commodity money systems use an asset with intrinsic value, whereas fiat money systems use an asset whose sole function is to serve as money. In modern economies, a central bank such as the Federal Reserve is responsible for controlling the supply of money.2. The quantity theory of money assumes that the velocity of money is stable and concludes that nominal GDP is proportional to the stock of money. Because the factors of production and the production function determine real GDP, the quantity theory implies that the price level is proportional to the quantity of money. Therefore, the rate of growth in the quantity ofmoney determines the inflation rate.3. Seigniorage is the revenue that the government raises by printing money. It is a tax on money holding. Although seigniorage is quantitatively small in most economies, it is often a major source of government revenue in economies experiencing hyperinflation.4. The nominal interest rate is the sum of the real interest rate and the inflation rate. The Fisher effect says that the nominal interest rate moves one-for-one with expected inflation.5. The nominal interest rate is the opportunity cost of holding money. Thus, one might expect the demand for money to depend on the nominal interest rate. If it does, then the price level depends on both the current quantity of money and the quantities of money expected in the future.6. The costs of expected inflation include shoeleather costs, menu costs, the cost of relative price variability, tax distortions, and the inconvenience of making inflation corrections. In addition, unexpected inflation causes arbitrary redistributions of wealth between debtors and creditors. One possible benefit of inflation is that it improves the functioning of labor markets by allowing real wages to reach equilibrium levels without cuts in nominal wages.7. During hyperinflations, most of the costs of inflation become severe. Hyperinflations typically begin when governments finance large budget deficits by printing money. They end when fiscal reforms eliminate the need for seigniorage.8. According to classical economic theory, money is neutral: the money supply does not affect real variables. Therefore, classical theory allows us to study how real variables are determined without any reference to the money supply. The equilibrium in the money market then determines the price level and, as a result, all other nominal variables. This theoretical separation of real and nominal variables is called the classical dichotomy.Chapter 61. The natural rate of unemployment is the steady-state rate of unemployment. It depends on the rate of job separation and the rate of job finding.2. Because it takes time for workers to search for the job that best suits their individual skills and tastes, some frictional unemployment is inevitable. Various government policies, such as unemployment insurance, alter the amount of frictional unemployment.3. Structural unemployment results when the real wage remains above the level that equilibrates labor supply and labor demand. Minimum-wage legislation is one cause of wage rigidity. Unions and the threat of unionization are another. Finally, efficiency-wage theories suggest that, for various reasons, firms may find it profitable to keep wages high despite an excess supply of labor.4. Whether we conclude that most unemployment is short-term or long-term depends on how we look a