Topics Finish the assignment from last class Clarification for 4 questions from last class Demand for goods and services Equilibrium and the interest rate

The Data of macroeconomics * Measure of economic activity Gross Domestic Product(GDP) Total expenditure on domestically-produced final goods and services Total income earned by domestically located factors of production

Money Supply 100%-reserve banking Fractional-reserve banking

Economics Studies human behavior Uncertainty ** It depends...*** on what?--- factors Why?--- intuitions How?--- logic Conclusions?

Microeconomics behind Macroeconomics Consumption Investment Money and Advances in business cycle model

Interest-Rate Differentials Country risk&ex -rate- expectations Country risk Political upheaval default on loan repayments higher i-rate to compensate Ex-rate expectations expect RMB to appreciate loans in RMB can pay a lower i-rate

The Open Economy in the SR The Mundell-Fleming Model Model under floating ex-rate Model under fixed ex-rate Interest-rate- differentials Debate over floating v.s. fixed ex-rate Mundell-Fleming model with changing price level Model in large open economy

The Open Economy Why do countries trade with each other? \No nation was ever ruined by trade.\ -- Benjamin Franklin More varieties; higher quality; cheaper price

Government Debt Scale of govern. debt Is budget deficit correctly measured? Traditional view of govern. Debt Ricardian equivalence Other possible effects of govern. debt

The Macroeconomic Policy Debate William McChesney Martin The fed.'s job is to take away the punch bowl just as the party gets going 联储的工作是在宴会进行时拿走盛满酒的酒杯。 The economy is inherently unstable