Econ 303 UIUC Intermediate Macroeconomics Introduction Mankiw The Macroeconomist as Scientist and Engineer The Journal of Economic Perspectives 29 4 29 46 Macroeconomics deals with aggregate economic variables Explains the facts on aggregate output consumption investment saving employment and inflation Explains the effect of government policy on these variables Two major frameworks views or camps Keynesian salty water macroeconomics Harvard and MIT Classical fresh water macroeconomics U of Chicago and Carnegie Mellon U of Minnesota Intermediate Macroeconomics Zhao 1 Econ 303 UIUC Why macro is harder than micro continued Simplest macro model in a closed economy involves four markets and three prices r or i W P at the same time in one period Goods market capital market Labor market Money market Classical system Labor market Y W P r Goods market Money market QTM P Keynesian system Goods market IS Money market i LM Labor market W AD Y P AS What is the emphasis of this class Transferable skills on the job market to think critically reason analytically solve problems and communicate clearly All about that Basic Skills Sensation is unorganized stimulus perception is organized sensation conception is organized perception science is organized knowledge and wisdom is organized life Perceptions without conceptions are blind Immanuel Kant Pythagorean s motto All is number Intermediate Macroeconomics Zhao 2 Econ 303 UIUC Differential Calculus Notation A linear example page 9 Intermediate Macroeconomics Zhao 3 Econ 303 UIUC A non linear example page 9 Additional thoughts If x 20 what is impact of additional x approximately Differential Calculus B Interpretation rate of change and impact A Graphic representation slope of a curve Local concept small changes Marginal Intermediate Macroeconomics Zhao 4 Econ 303 UIUC Derivatives of some simple functions Find derivatives of the following function page 10 Intermediate Macroeconomics Zhao 5 Rule of differentiation Econ 303 UIUC Intermediate Macroeconomics Zhao 6
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