Macroeconomics week 1 + 2
Module code: EC108
Lecturer: Stefania Paredes Fuentes
Topics
● Business cycles
● Business cycles, unemployment and inflation
Business cycles
- A country’s economy fluctuates between period of expansion and contraction
- Business cycle models show how a country’s GDP fluctuates over time (short run)
Why GDP fluctuates
- AD = C + I + G + Net Exports(NX)
- Consumption tends to count for the majority of GDP, second being investment
- C remains more stable as consumers try to keep the same living standards
- The poorer section of the population will be more credit constrained (less likely to
have access to credit markets - debt + loans etc) = less able to smooth consumption
over time
Why investments are volatile
Positive expectations of future demand:
- The capacity utilisation rate is a measure of
the extent to which the
firm/industry/economy is producing as much
as the resources will allow
Module code: EC108
Lecturer: Stefania Paredes Fuentes
Topics
● Business cycles
● Business cycles, unemployment and inflation
Business cycles
- A country’s economy fluctuates between period of expansion and contraction
- Business cycle models show how a country’s GDP fluctuates over time (short run)
Why GDP fluctuates
- AD = C + I + G + Net Exports(NX)
- Consumption tends to count for the majority of GDP, second being investment
- C remains more stable as consumers try to keep the same living standards
- The poorer section of the population will be more credit constrained (less likely to
have access to credit markets - debt + loans etc) = less able to smooth consumption
over time
Why investments are volatile
Positive expectations of future demand:
- The capacity utilisation rate is a measure of
the extent to which the
firm/industry/economy is producing as much
as the resources will allow
