Essentials of Macroeconomics

In Macroeconomics the object is to study the performance, structure and behavior of a national or regional economy as a whole. The textbook provides a comprehensive overview of all facets from Macroeconomics.

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1. Prices and inflation
1.1. Prices and price level
1.1.1. Price level
1.1.2. Price level and time
1.1.3. Price index
1.1.4. Consumer Price Index, CPI
1.1.5. Problems with CPI
1.2. Inflation
1.2.1. Definition
1.2.2. Inflation in Germany
1.2.3. Inflation in Sweden

2. Exchange rate
2.1. Definition
2.2. Exchange rate systems
2.3. Changes in the exchange rate
2.4. The euro against the US dollar
2.5. Effective exchange rate

3. Gross domestic product
3.1. Definition
3.2. Real GDP
3.3. Growth
3.4. Purchasing power
3.5. GDP is a flow!

4. The components of GDP
4.1. The circular flow – simple version
4.2. The circular flow – a more detailed version
4.3. Modeling a firm and the concept value added
4.4. Firms in the circular flow
4.5. Circular flow – circulation of goods
4.6. Circular flow – circulation of money
4.7. Private sector in the circular flow
4.8. The Government, Rest of the World and the financial markets
4.9. Components of GDP
4.10. Four different measures of GDP
4.11. Capital
4.12. Investment
4.13. Components of GDP in numbers 200x

5. The Labor Market
5.1. Introduction
5.2. Uneployment classification
5.3. Full employment
5.4. Wages
5.4.1. Nominal wages
5.4.2. Wages and income
5.4.3. Nominal wage level
5.4.4. Real wage

6. Money and banks
6.1. Money
6.1.1. Money, definition
6.1.2. Two types of money
6.1.3. What is money and what is not money
6.1.4. Money, wealth and income
6.1.5. Economic functions of money
6.2. Central banks
6.2.1. Introduction
6.2.2. Monetary base
6.3. Commercial banks
6.3.1. Currency inside banks is not money
6.3.2. How commercial banks “create money”
6.3.3. How much money can banks create?
6.3.4. The multiplier effect

7. Interest rate
7.1. Introduction
7.2. Market interest rates
7.2.1. Relationship between the interest rate and the bond price
7.2.2. Calculating interest rates on a yearly basis
7.2.3. The yield curve
7.2.4. Other interest rates
7.3. Overnight interest rates
7.3.1. The market for overnight loans
7.3.2. Central bank overnight interest rate
7.4. Monetary policy
7.4.1. Central bank and monetary policy
7.4.2. Monetary base and the supply of money
7.4.3. Overnight interest rates targets and money supply
7.4.4. Overnight rates and interest rates with longer maturity
7.4.5. Overnight target rates and inflation
7.5. The real interest rate
7.5.1. Interest rates and inflation
7.5.2. Nominal and real interest rates
7.5.3. Expected inflation
7.5.4. Relation between nominal interest rate, real interest rate and inflation

8. Macroeconomic models
8.1. Introduction
8.2. Common assumptions
8.2.1. Unemployment and hours worked are directly related
8.2.2. The central bank has complete control over money supply
8.2.3. Monetary policy = change in money supply
8.2.4. There is just one interest rate
8.2.5. Exchange rate
8.2.6. Capital Flows
8.3. The macroeconomic variables
8.3.1. Supply and demand
8.4. About the various models

9. Growth theory
9.1. Introduction
9.2. The aggregate production function
9.2.1. Definition
9.2.2. The marginal product of labor and capital
9.2.3. Production function and Growth
9.3. Growth Theories
9.3.1. The classical growth theory
9.3.2. The neo-classical growth model
9.4. Endogenous growth theory
9.5. Separation of growth and fluctuation

10. The classical model
10.1. Introduction
10.2. Labor Market
10.2.1. Demand for labor
10.2.2. The supply of labor
10.2.3. Equilibrium in the labor market
10.3. GDP, and Say’s Law
10.3.1. Aggregate supply
10.3.2. Aggregate demand and Say’s Law
10.3.3. How not to justify Say’s Law
10.4. The price level and the quantity theory of money
10.4.1. The quantity theory of money
10.4.2. The price level
10.4.3. Aggregate demand
10.4.4. Nominal wages
10.5. Interest rate, consumption and investment
10.5.1. The consumption function
10.5.2. Investment demand
10.5.3. Government revenue, government spending and net exports
10.5.4. Household savings
10.5.5. Total savings
10.5.6. Interest rate determination
10.5.7. Consumption
10.6. Determination of all the variables in the classical model

11. Keynesian cross model
11.1. Introduction
11.1.1. The Keynesian model
11.1.2. Summary of the cross model
11.2. Aggregate demand
11.2.1. The consumption function
11.2.2. Consumption and GDP
11.2.3. The rest of the world in the cross model
11.2.4. The government in the cross model
11.2.5. Savings
11.2.6. Aggregate demand in the cross model
11.3. Determination of GDP in the cross model
11.3.1. Main result
11.3.2. Justification
11.3.3. Say’s Law
11.3.4. Reversed Say’s Law
11.3.5. Determination of other variables
11.4. Labor market
11.4.1. Labor supply and labor demand in the Keynesian model
11.4.2. The labor in the cross model
11.4.3. Aggregate supply
11.4.4. Determination of L in the cross model
11.4.5. Equilibrium analysis

12. IS-LM-model
12.1. Introduction
12.2. Aggregate demand
12.2.1. The investment function in the IS-LM model
12.2.2. The consumption function in the IS-LM model
12.2.3. Aggregate demand
12.3. The money market
12.3.1. Demand for money
12.3.2. Demand for money and the interest rate
12.3.3. Demand for money and GDP
12.3.4. Supply of money
12.3.5. Equilibrium in the money market
12.3.6. Money market diagram
12.4. IS-LM diagram
12.4.1. IS-curve
12.4.2. The LM curve
12.4.3. Simultaneous determination of Y and R in the IS-LM model
12.5. The Labor Market

13. The AS-AD-model
13.1. Introduction
13.1.1. The problem with the IS-LM model
13.1.2. How the AS-AD model solves the problem
13.2. The assumptions of the AS-AD model
13.2.1. Summary
13.2.2. The AS-AD model and inflation
13.3. The goods and the money market in the AS-AD model
13.3.1. The goods market and aggregate demand
13.4. The money market
13.4.1. The money market and price changes
13.4.2. The IS-curve in the AS-AD model
13.4.3. The LM-curve in the AS-AD model
13.4.4. Equilibrium in both the goods and in the money market
13.4.5. The AD curve
13.4.6. The AD curve is the aggregate demand
13.5. Aggregate supply
13.5.1. The Labor Market
13.5.2. Aggregate supply and the AS curve
13.6. Determination of all the endogenous variables in the AS-AD model
13.6.1. Determination of P and Y
13.6.2. Determination of other variables
13.6.3. The equations of the AS-AD model

14. The complete Keynesian model
14.1. Introduction
14.1.1. Wage inflation
14.1.2. Price Inflation
14.2. Adjustments to the Keynesian models when wages are no longer constant
14.2.1. Real interest rates, nominal interest rate and expected inflation
14.2.2. Aggregate demand with inflation
14.2.3. The IS curve with inflation
14.2.4. The money market with inflation
14.2.5. The LM curve with inflation
14.3. The IS-LM model with inflation
14.3.1. The basic assumption
14.3.2. Results
14.4. The AS-AD model with inflation
14.4.1. The AD-curve at a given point in time
14.4.2. The AD curve over time
14.4.3. The Labor Market
14.4.4. The AS curve
14.4.5. The AS-AD model with inflation
14.5. The Phillips curve
14.5.1. The problem with the Keynesian model
14.5.2. The Phillips curve
14.5.3. Determination of all endogenous variables

15. The neo-classical synthesis
15.1. Introduction
15.2. The various Phillips curves
15.2.1. The augmented Phillips curve
15.2.2. Money illusion
15.2.3. The long-run Phillips curve
15.2.4. Summary of the Phillips curves
15.2.5. The classical model and the long-term Phillips curve
15.2.6. Developments around 1960
15.3. From short to long run
15.3.1. The dynamics from the short to the long run
15.3.2. NAIRU
15.4. SAS-LAS-AD model of the neo-classical synthesis
15.4.1. AS-AD in the Keynesian and the classical model
15.4.2. SAS, LAS, and AD
15.4.3. The dynamics from the short to the long run

16. Exchange rate determination and the Mundell-Fleming model
16.1. Introduction
16.1.1. The open economy
16.1.2. The rest of the world as one country
16.1.3. Exchange rate systems
16.2. The classical model of exchange rate determination
16.2.1. The law of one price
16.2.2. PPP
16.2.3. The Big Mac Index
16.2.4. Exchange rate determination
16.2.5. Inflation
16.2.6. Differences in inflation under fixed exchange rates
16.2.7. Differences in inflation under flexible exchange rates
16.3. The exchange rate
16.3.1. Trade and tourism
16.3.2. Capital flows
16.3.3. Trade and exchange rate
16.3.4. Investment and the exchange rate
16.3.5. Supply and demand for the foreign currency
16.3.6. Factors affecting E*
16.4. Mundell-Fleming model
16.4.1. Interest rates within in the same currency area
16.4.2. Interest rates between currency areas
16.4.3. Expected depreciation
16.4.4. Interest rate parity
16.4.5. Modeling expected depreciation
16.4.6. The IS-LM model under fixed exchange rates
16.4.7. The IS-LM model with flexible exchange rates