Term Paper
Term Paper
Introduction
The field of macroeconomic theory has evolved rapidly over the last quarter century. A quick glance at the discipline’s leading journals reveals that virtually the entire academic profession has turned to interpreting macroeconomic data with models that are based on microeconomic foundations. The Macroeconomics Theory and Policy is a great textbook to learn these models and theories. It rely more on the tools of microeconomic theory. This approach assumes that economic decisions are made for a reason. People are assumes to have a well-defined objective in life which represented by preferences. Various constraints such as nature, markets, the government, etc. Place restrictions on how this objective can be achieved. By assuming that people try to do the best they can subject to these constraints, optimal behavioral rules can be derived instead of assumed. `Macroeconomic variables can then be computed by summing up the actions of all individuals. This approach has at least two main benefits. First, to the extent that the deep parameters describing preferences and constraints are approximated reasonably well, the theory can provide reliable predictions over any number of hypothetical policy experiments. Second, since preferences are modeled explicitly, one can easily evaluate how different policies may affect the welfare of individuals (although, the problem of constructing a social welfare function remains as always). As it turns out, more unemployment is not always bad, more GDP is not always good, a current account deficit is not always bad, and business cycles are not necessarily bad either.
The Part I, Part II and Part III talks about the macroeconomics from the basic, the actual and potential GNP and GDP, which determined by different output and input. For the government, economy needs some policy the control over, so the Fiscal Policy and Monetary Policy are made to adjust it. Most of these policies are try to balance the relationships
Introduction
The field of macroeconomic theory has evolved rapidly over the last quarter century. A quick glance at the discipline’s leading journals reveals that virtually the entire academic profession has turned to interpreting macroeconomic data with models that are based on microeconomic foundations. The Macroeconomics Theory and Policy is a great textbook to learn these models and theories. It rely more on the tools of microeconomic theory. This approach assumes that economic decisions are made for a reason. People are assumes to have a well-defined objective in life which represented by preferences. Various constraints such as nature, markets, the government, etc. Place restrictions on how this objective can be achieved. By assuming that people try to do the best they can subject to these constraints, optimal behavioral rules can be derived instead of assumed. `Macroeconomic variables can then be computed by summing up the actions of all individuals. This approach has at least two main benefits. First, to the extent that the deep parameters describing preferences and constraints are approximated reasonably well, the theory can provide reliable predictions over any number of hypothetical policy experiments. Second, since preferences are modeled explicitly, one can easily evaluate how different policies may affect the welfare of individuals (although, the problem of constructing a social welfare function remains as always). As it turns out, more unemployment is not always bad, more GDP is not always good, a current account deficit is not always bad, and business cycles are not necessarily bad either.
The Part I, Part II and Part III talks about the macroeconomics from the basic, the actual and potential GNP and GDP, which determined by different output and input. For the government, economy needs some policy the control over, so the Fiscal Policy and Monetary Policy are made to adjust it. Most of these policies are try to balance the relationships