宏观经济管理学与财务知识分析(英文版).pptx

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1、CHAPTER 6Building Blocks of the Flexible-Price Model1Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Questions What is a full-employment analysis? What keeps the economy at full employment when wages and prices are flexible? What determines the level of consumption spending? Wh

2、at determines the level of investment spending?2Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Questions What determines the level of net exports? What determines the level of the exchange rate?3Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Full-Employm

3、ent Analysis We will now look at the economy over the short-runa period in which its productive resources are fixed We will assume that wages and prices are flexible so that all markets clearsupply equals demand in the labor marketfull-employment analysis4Copyright 2002 by The McGraw-Hill Companies,

4、 Inc. All rights reserved.Flexible-Price Model Two sets of factors determine the levels of potential output and real wagesthe production functionthe balance of supply and demand in the labor market5Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The Production Function Potentia

5、l output (Y*) is determined bythe size of the labor force (L)the economys capital stock (K)the efficiency of labor (E)a parameter indicating how quickly returns to investment diminish ()1(LE)(K)Y*6Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Figure 6.1 - The Production Funct

6、ion7Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Flexible-Price Model The assumption that wages and prices are flexible was commonly made by “classical” economists Thus, this assumption is often called the classical assumptionguarantees that markets workguarantees full emplo

7、ymentguarantees that actual output is equal to potential output8Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Flexible-Price Model The flexible-price assumption is not always a good onea market economy does not always produce full employment The “Keynesian” model assumes that

8、 wages and prices are stickythis will be covered in Section III of text The Classical assumption simplifies the analysis of the economy9Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Table 6.1 - Classical Flexible-Price versus Keynesian Sticky-Price Analyses10Copyright 2002 by

9、 The McGraw-Hill Companies, Inc. All rights reserved.The Labor Market Assume there are K identical firmseach firm owns one unit of the economys capital stockeach firm hires L workers and pays them the same wage Weach firm sells Y units of output at a per-unit price of Pno firm has control over the p

10、rice it receives or the wage it pays these are determined by the market11Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The Labor Market To determine how many workers to hire, the firm follows two ruleshire workers to boost outputstop hiring when the extra revenue from the out

11、put hired by the last worker just equals his or her wage12Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The Labor Market The value of the output produced by the last worker hired is the product price (P) multiplied by the marginal product of labor (MPL) The cost of hiring the

12、 last worker is his or her wage (W) The firm will keep hiring until0W-MPLP13Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The Labor Market The marginal product of labor is the difference between what the firm can produce with its current labor force (Lfirm) and what it could

13、produce if it hired one more worker At its current labor force, the output of the firm will be)LF(1,Yfirmfirm14Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The Labor Market Therefore, the marginal product of labor (MPL) must be equal to)LF(1,1)LF(1,MPLfirmfirm15Copyright 200

14、2 by The McGraw-Hill Companies, Inc. All rights reserved.Figure 6.2 - The Firms Output as a Function of the Firms Employment16Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The Labor Market Using the Cobb-Douglas form of the production function1111)(LE)(K1)(LE)(KMPLfirmfirmfir

15、mfirm Since Kfirm=11111)(LE(1)1)(LE(1)MPLfirmfirm)L(1)(LEMPL111firmfirm17Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The Labor Market The term in the brackets is a growth rate of a variable raised to a power)L(1)(LEMPL111firmfirm)(L1)(1)L(1)(Lfirmfirmfirm11)(L)E(1MPLfirm118

16、Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The Labor Market The firm hires workers up to the point where the product price multiplied by the marginal product of labor equals the wage0W-MPLP Substituting for MPLW)(L)E-(1Pfirm-119Copyright 2002 by The McGraw-Hill Companies,

17、Inc. All rights reserved.Figure 6.3 - The Typical Firms Hiring Policy20Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The Labor Market The typical firms demand for labor is1/-1(W/P)E-(1Lfirm Because there are K firms in the economy, total economy-wide employment will be1/-1d(W

18、/P)E-(1KL21Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The Labor Market If there are more workers than firms want to hire at the current wagesome of the unemployed will underbid their fellow employed workersthose who are employed will respond by accepting a lower wage to ke

19、ep their jobsreal wages will fall and firms will hire more workers22Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The Labor Market If there are fewer workers than firms want to hire at the current wagesome firms will try to bid workers away by offering higher wagesthe real wa

20、ge will rise and firms will reduce the quantity of labor demanded Equilibrium occurs in the labor market when labor demand is equal to the labor force23Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Figure 6.4 - Equilibrium in the Labor Market24Copyright 2002 by The McGraw-Hil

21、l Companies, Inc. All rights reserved.The Labor Market Equilibrium in the labor market means that1/-1d(W/P)E-(1KLL This means that the equilibrium real wage is equal toLY)-(1LK)E-1(PW-125Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The Labor Market When the labor market is i

22、n equilibrium, the typical firm produces an output level equal to-1-1(L/K)(E)(1)Yfirm Total output will be K multiplied by the typical firms output-1-1(L)(E)(K)YKYfirm26Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The Labor Market Simplifying, we get the Cobb-Douglas product

23、ion function-1-1(L)(E)(K)YKYfirm*Y(LE)(K)Y-1 If markets work well, the actual level of output in the economy (Y) will be equal to the economys potential output (Y*)27Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Figure 6.5 - In a Full-Employment Economy, Real GDP Equals Poten

24、tial Output28Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Domestic Spending National income can be divided into four componentsconsumption spending (C)investment spending (I)government purchases (G)net exports (NX)YNXGIC29Copyright 2002 by The McGraw-Hill Companies, Inc. All

25、 rights reserved.Figure 6.6 - The Four Components of Spending Add Up to Real GDP30Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Consumption Spending Households use income (Y) in three wayspay net taxes (T) assume that T = t Y, where t is an average tax rate disposable income

26、is equal to income minus taxes YD = Y-T = (1-t)Ysave (SH)consume (C)HHDS-T-YS-YC31Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Figure 6.7 - From National Income to Consumption Spending32Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Consumption Spendin

27、g Consumption spending can be broken down into two componentsa baseline level of consumption (C0) the amount that households would spend on consumption goods if they had no income a fraction of disposable income (Cy YD) Cy is the marginal propensity to consume, amount by which consumption spending r

28、ises in response to a $1 increase in disposable income33Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Consumption Spending Consumption is assumed to be a linear function of real GDP (Y) There are other factors that affect consumption besides disposable incomeassumed to affect

29、 baseline consumption (C0) onlyt)Y-(1CCYCCCy0Dy034Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Figure 6.8 - Other Determinants of Consumption Spending35Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Consumption Spending Cy is the marginal propensity to

30、 consume 0Cy1if incomes rise, households will use some of their extra income to increase their consumption spendingas incomes rise, households will also increase their saving36Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Figure 6.9 - The Consumption Function37Copyright 2002

31、by The McGraw-Hill Companies, Inc. All rights reserved.Consumption Spending Examplethe tax rate (t) = 25%, national income (Y) = $10 trillion, the baseline level of consumption (C0) = $2 trillion, and the marginal propensity to consume (Cy) = 0.6 trillion $7.5trillion $100.25)-(1YDtrillion $6.5trill

32、ion) $7.50.6(trillion $2C38Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Investment Spending Fluctuations in investment spending have two sourcesthe interest rate a higher real interest rate makes investment projects more expensive and lowers investmentbusiness managers and i

33、nvestors confidence the higher their confidence, the higher is investment spending39Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Investment Spending Firms invest because their managers believe that the investment projects will be profitablethis means that the discounted retu

34、rns on the investments must be greater than the investments coststhe most relevant interest rate for determining the profitability of an investment is the long-term, real, risky interest rate 40Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Investment Spending Investment spend

35、ing has two componentsthe baseline level of investment (I0)the responsiveness of investment to changes in the interest rate (Ir)r)(I-IIr041Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Figure 6.10 - The Investment Function42Copyright 2002 by The McGraw-Hill Companies, Inc. Al

36、l rights reserved.Investment Spending Examplethe baseline level of investment (I0) = $2 trillion, the interest-sensitivity of investment (Ir) = $10 trillion, and the real interest rate = 5%trillion $1.50.05)trillion ($10 - trillion $2I43Copyright 2002 by The McGraw-Hill Companies, Inc. All rights re

37、served.Investment Spending An alternative way of looking at investment is to see the level of investment as a function of the level of the stock market The same things that determine the value of the stock market also determine the level of investmentexpected future profits (confidence)the real inte

38、rest rate44Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Government Purchases Government purchases (G) include purchases of labor and other goods and services by federal, state, and local governments Government purchases do not include transfer paymentstransfer payments are n

39、egative taxes Economists do not inquire into what determines G (or the tax rate t)45Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Figure 6.11 - Government Purchases, Transfer Payments, and Taxes46Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Internatio

40、nal Trade Net exports (NX) is the difference between gross exports (GX) and imports (IM)IM-GXNX 47Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Figure 6.12 - Gross Exports, Imports, andNet Exports48Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Gross Ex

41、ports The volume of gross exports (GX) depends on two variablesthe real GDP of the countrys trading partners (Yf)the real exchange rate ()(X)Y(XGXfyfXyf is the increase in exports generated by an increase in foreign GDPX is the increase in exports from an increase in the real exchange rate49Copyrigh

42、t 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Figure 6.13 - Gross U.S. Exports and the Real Exchange Rate, 1980-199050Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Gross Exports In the real world, there are substantial lags that occur between changes in the re

43、al exchange rate and changes in the level of gross exportsa change in the real exchange rate this year will have little or no effect on gross exports this year, but will have effects on gross exports one, two, and three years into the future51Copyright 2002 by The McGraw-Hill Companies, Inc. All rig

44、hts reserved.Figure 6.14 - The J-Curve in the 1980s52Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Gross Imports The value of demand for imports depends on domestic real GDP (Y) The quantity of imports demanded depends also on the real exchange rate ()however, the value of im

45、ports is largely independent of the real exchange rategross imports will be a constant share of real GDPYIMIMy53Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Net Exports Net exports (NX) are the difference between gross exports (GX) and imports (IM)Y)(IM-)(X)Y(XIM-GXNXyfyf Ne

46、t exports depend on three thingsthe real exchange rate ()the level of real GDP abroad (Yf)the level of real GDP at home (Y)54Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The Exchange Rate The lives of foreign exchange speculators are ruled by fear and greeda higher U.S. inte

47、rest rate means that an individual can profit from buying U.S. bonds the greater this interest differential, the higher the greed factorif the U.S. real exchange rate rises, profits from holding U.S. bonds will be lower the higher the greed factor, the lower must be the exchange rate in order for fe

48、ar to offset the greed55Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.Figure 6.15 - Greed and Fear in Foreign Exchange Markets56Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved.The Exchange Rate The real exchange rate is determined by two componentsthe av

49、erage foreign exchange traders opinion of what the exchange rate should be if there was no interest differential (0)the sensitivity of the exchange rate (r) to the interest rate differential between domestic real interest rates (r) and foreign real interest rates (rf)r-(r-fr057Copyright 2002 by The

50、McGraw-Hill Companies, Inc. All rights reserved.Net Exports Substituting in for the real exchange rate, we getY)(IM-)(X)Y(XIM-GXNXyfyfY)(IM-)r(Xr)(X-)(X)Y(XNXyfrrfyf0 Having the definition of net exports in this form tells us directly how domestic and foreign interest rates affect net exports58Copyr