La nueva Macroeconomía - National income

Session 11:

For the very begging we correct all the exercises from the Problem Set 2 and after that we reviewed all the topics.

• Main variables:

GDP, Unemployment rate, Inflation rate, government debt/deficit, Interest rate

1. Evaluate economies policies to do an economic analysis after looking the variables (fiscal policy..goverment and taxes/ monetary policy…money supply)

Circular flow was use to explain this theory.

1. Analyze Structural policies (long run)

Classical dichotomy does not affect real gdp, unemployment and real interest rate.

1. Economic fluctuations

• National income

(Real variables)

What determines is K and L. Diminishing returns for capital and labor and Constant return to scale

How output is distributed…

Y= (W/p x L) + (r/p x K)  =  in the long run is the same than…  MPL x L + MPK x K        

Equilibrium in the k and L markets:

• 3 ec. Agents : Households, firms and governments
• 3 markets: Factors of production, goods and services market and financial market.

Four graphs, R/p and K, W/P and L, r and S,I, r and Y= F(K, L) where it is included AD (aggregate demand) that it is equal to = C + I(C) + G

Comparative statics (evaluation of fiscal policy)

• Money and inflation (nominal variables)

• What money is: M
• Who distributed M^S(money supply): Central bank. (monetary policy)
• Theory of money: M x V = P x Y
• Hyperinflation
• Seigniorage: inflation - tax (profit earned by the government by printing money)

-Relation between i and r: fisher effect equation

- Extension of Q. theory of money: M^D = L(i,Y)

Money demand is a function affected by output and interest rate. “L” is Liquidity.

Moreover we talked about the topic: “Podemos”

[pic 1]

Tax policy in the financial policy

Immigration policy: leave the NATO, stop the immigration detention policy, cancel Frontex and EUROSUR, Maintenance of residence authority after losing a job, right to love.

Conclusion: they have some potentially beneficial ideas, most of their proposals are not quantitative and may be hard to implement in real life. They generally focused on social and political issues in their campaign. We got the impression that in their proposals they were guided by their ideological beliefs, regardless of how realistic it is to implement these plans in real life.

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