Summary Macroeconomics: A European Perspective (ECB1MACR)

Summary Macroeconomics: A European
Perspective
Chapters 3-6, 8-10 and 13-15

, Summary Macroeconomics: A European Perspective


Table of contents
3. The Goods Market ........................................................................................................ 4
3.1 Composition of GDP ............................................................................................... 4
3.2 The demand for goods ............................................................................................ 4
3.3 Equilibrium output ................................................................................................... 4
3.4 Investment equals saving........................................................................................ 7

4. Financial Markets ......................................................................................................... 8
4.1 The demand for money ........................................................................................... 8
4.2 Determining the interest rate: part 1 ........................................................................ 9
4.3 Determining the interest rate: part 2 ...................................................................... 11

5. Goods and Financial Markets: the IS-LM Model. ..................................................... 15
5.1 The goods market and the IS relation ................................................................... 15
5.2 Financial markets and the LM relation................................................................... 17
5.3 Putting the IS and LM relations together ............................................................... 18
5.4 Using a policy mix ................................................................................................. 21
5.5 IS-LM and the liquidity trap ................................................................................... 21

6. The IS-LM Model in an Open Economy .................................................................... 23
6.1 Openness in goods markets ................................................................................. 23
6.2 Openness in financial markets .............................................................................. 23
6.3 The IS relation in an open economy...................................................................... 25
6.4 The LM relation in an open economy .................................................................... 27
6.5 Putting goods and financial markets together in an open economy ....................... 27

8. The Labor Market ....................................................................................................... 29
8.1 A tour of the labor market...................................................................................... 29
8.2 Wage determination .............................................................................................. 29
8.3 Price determination ............................................................................................... 30
8.4 The natural rate of unemployment ........................................................................ 30
8.5 Where we go from here ........................................................................................ 33

9. Putting all Markets Together: the AS-AD Model ...................................................... 34
9.1 Aggregate supply .................................................................................................. 34
9.2 Aggregate demand ............................................................................................... 35
9.3-9.6 ............................................................................................................................. 36


2