Chapter 1
Introduction
0
10
20
30
40
90 91 92 93 94 95 96 97 98 99 00
Logion
? Economists‖ on some level are
mathematicians,historians,diplomatists,
philosophers… and they are as indifferent and
honest as artists‖,
——John Maynard Keynes
? ―When economists are analyzing economical
affairs or public policies,they are always
remembering different models。,
——Gregory Mankiw
Main Contents
? 1.1 Objectives and scopes of
macroeconomics
? 1.2 Chinese macroeconomic facts
? 1.3 Nature of Macroeconomics
Analysis
? 1.4 Brief history of Macroeconomics
? 1.5 Methodology of Macroeconomics
? 1.6 Features of This Text
1.1 Objectives and Scopes of
Macroeconomics
? Microeconomics,
To take the behaviors of single corporation or
familiar as research objects,which aims to know
the relationship between demand-supply
behaviors and price changes,
Macroeconomics,
To focus on operational situation of the whole
economy in one country and how the government
uses economical policies to influence the
operation of the whole economy in one country.,
1.1 Objectives and Scopes of
Macroeconomics
Content One,
Economic Growth in the Long Term
? Growth resources
?Increase of Labor Force
?Average person productivity increase
U.S,average actual GDP from 1900
to 2000
1.1 Objectives and Scopes of
Macroeconomics
Content Two,Business Cycle
?Different characteristics of business cycles
?Various explanations of periodic fluctuation
1.1 Objectives and Scopes of
Macroeconomics
Content Three,Unemployment
?Basic concepts
? Those who have the working ability and look for works
but can not get them
?Measurement
? Unemployment populace is divided by total labors
Americans’ unemployment ratio from
1900 to 2000
1.1 Objectives and Scopes of
Macroeconomics
Content Four,Inflation
? Basic concepts
? Prices of most commodities and services keep increasing
during certain time in one economy,
?Reasons
? Issued too many currencies,overmuch demands for
investment and consumption,increase of cost such as
wages
U.S,Inflation Ratio from 1900 to 2000
1.1 Objectives and Scopes of
Macroeconomics
Content Five,International Economy
? Close economy
? Open economy
? Inflation will transmit between different countries
? Trade surplus and deficit will influence domestic
employment and government revenues
Rate of growth export
commodities （ %）
Average annual rate of
growth14.15%
1.1 Objectives and Scopes of
Macroeconomics
? China’s gross foreign export
value （ 100 million dollars）
1990 620.9000
1991 718.4000
1992 849.4000
1993 917.4000
1994 1210.100
1995 1487.800
1996 1510.500
1997 1827.900
1998 1838.100
1999 1949.300
2000 2492.000
2001 2661.000
0
10
20
30
40
90 91 92 93 94 95 96 97 98 99 00 01
1.1 Objectives and Scopes of
Macroeconomics
Content Six,Policies of Macroeconomics
?Fiscal policies
? Constituted by government tax policies and expenditure
policies
?Monetary policy
? How to decide and adjust the currency’s supply rate under the
control of central government in one country
1.2 Chinese Macroeconomic
Facts
Growth and fluctuation of Chinese economy
?Sources of growth
? Increase of Labor Force
? Increase of per-capita productivity
年份
1.2 Chinese Macroeconomic Facts
——Economic growth and fluctuation
NI
gr
ow
th
ra
te
（%
）
-30
-20
-10
0
10
20
30
50 55 60 65 70 75 80 85 90 95 00
? Before1978,unemployment and inflation were both
recessive; after reform and opening-up,unemployment and
inflation became a pair of contradiction in Chinese macro
economy,
index of retail price（ last year=100） Urban registered jobless rate
（ %）
1.2 Chinese Macroeconomic Facts
——Unemployment and inflation
95
100
105
110
115
120
125
78 80 82 84 86 88 90 92 94 96 98 00
1.5
2.0
2.5
3.0
3.5
4.0
78 80 82 84 86 88 90 92 94 96 98 00
? Since 1979,one of very important changes of
Chinese macro-economy is the raise of opening
degree to the outside world
Year Import Export FDI
1980 200.17 181.9 18.02/4
2001 2436.1 2661.5 468.8
Unit,a hundred million $
1.2 Chinese Macroeconomic Facts
——opening to the outside world
1.3 Nature of Macroeconomic
Analysis
? Prediction on macro economy
? Analysis of macro economy
? Research of macro economy
? Treating the whole economic activities as a system,modern
macroeconomics aims at studying general trend of one economy
by analyzing the total process of this system,In another word,it
studies the whys and internal relationship between gross
economic facts,such as the determinants of gross output,gross
employment and average prices,and how these facts are
influenced by balance of payments or the change of exchange
rate,
1.3 Nature of Macroeconomics
Analysis
1.4 Brief History of Macroeconomics
mercantile system classical economics vulgar economics neoclassical synthesis
(early 15c -17c) （ mid 17c –early 19c） （ early 19c -20c30 ） (20c30 - )
<before
Manipulatory
manufacture>
<manipulatory
manufacture> Seedtime of capitalism Senior period of capitalism
Ex-history First period of capitalism
all kinds of
theory of value
theory of labor value
Hand invisibly
Animadvert on
feudal society
theory of marginal
utility value
Anarchism,free competition
Advocate capital society
theory of insufficient
effective demand
government
interference
Three times modify
1,monopoly（ Chamberlain and so on ）
a quantitative question
2,Keynesianism—a quantum problem
3,Ordinal utility and
general equilibrium
-a quantity problem
Samuelson
Grouped into
mixed
economy
70s
stagflation
School of monetarism
School of
rational expectations
School of supply
Classical macroeconomics model<marginal analysis method>
? System info of macroeconomics
Monetarism,Supply genre,Rational expectations genre
keynesian model
Equilibrium of product markets
Equilibrium of money market
Equilibrium of labor market
Neoclassical synthesis
AD curve（ Keynes’）
AS curve（ wage rigidity）
Philips Curve
Macroeconomic
policy
Explain
economical
operation
1.4 Brief History of Macroeconomics
Introduction,Milton Friedman
? Winners of Nobel Prize in Economics in 1976
? Study field,
? Consumption
? Monetary history and
monetary policy
? Hybrid use of stability policy
Introduction,Robert E,Lucas
? Winner of Nobel Prize in Economics in 1995
? Study field,
? Rational expectations
? Theory of neutrality of money
? Analysis of Transitional Economies
1.4 Brief History of Macroeconomics
? Early macroeconomics ideas
? Classical approach
? Keynesianism
? Monetarism
? Neoclassicism and neoclassical synthesis
? Supply genre
? Rational expectations genre
? Neoclassicism and neoclassical synthesis
?Hansen and Samuelson put forward theory of forty-five degree line。
?Solow and others set up neo-classical growth model
?Philips put forward Philips Curve,to explain inflation
? Hicks and Modigliani reached the state which is smaller than the
point of full employment based on Ns and Nd of Neoclassicism,（ r
can not fluctuate; traps; wage rigidity）
1.4 Brief History of Macroeconomics
? Neo-quantity theory
? Hypothesis of natural rate
? Policy allegation,agree with monetary policy,but oppose fiscal
policy,and meanwhile oppose the monetary policies which is after
considerations,and claims for single policy rules
),1,,,,,( ?dtdpprrrwyfPMm ebm??
1.4 Brief History of Macroeconomics
? Supply genre
? Theory core,supply
creates demand by itself
? Main analysis,supply
effect
? Main viewpoint,basic
single proposition about
marginal rate of tax
?Laffer’s Curve
Tax amount T
Tax rate t
O
t P
1.4 Brief History of Macroeconomics
? Rational
expectations genre
? Expectations and rational expectations,
concept and type
? Basic viewpoint,natural rate hypothesis; completely
invalidation of macroeconomic policies ； Microcosmic base of
macro-economics theory
Static expectations
Extrapolation
expectations
Adaptability
expectations
equal to actual amount of last term
actual amount of last term
and changes
actual amount of last
term and his errors
1.4 Brief History of Macroeconomics
?Difference between neoclassicism and New-
Keynesian
? Difference of basic hypothesis,whether market is clearing
? Different explanations of economical fluctuant,
neoclassicism explains it from supply changes of real factors,
while new-Keynesian explains it from demand changes of
monetary factors,
?Divergence of policies,neoclassicism,considering
economic policies invalid,opposes intervention in economy by
government,
1.4 Brief History of Macroeconomics
1.5 Methodology of Macroeconomics
? Macroeconomics synthesizes all markets of
one economical system into three markets：
money market,commodity market and labor
market,
? Macroeconomic analysis are based on single
behavior analysis of microeconomics
? Macroeconomics set up theory models with
necessary hypothesis,based on observation
of practical economic phenomena,and then
make use of data from actual world to verify
theory models,
1.5 Methodology of Macroeconomics
? When it comes to new problems and phenomena，
logistic structure of macroeconomics theory drawn
from macroeconomic research,is called
macroeconomics models,many of which are
expressed in mathematical linguistics
? Any macroeconomics textbook is full of so many
mathematical models that if one wants to success in
economic research he needs solid mathematical
foundation,
1.6 Features of This Text
? Basis of macroeconomics
? Further research and expansion of
theory systems
? Discussion of front-line research
Chapter 1
The End
0
10
20
30
40
90 91 92 93 94 95 96 97 98 99 00
Introduction
0
10
20
30
40
90 91 92 93 94 95 96 97 98 99 00
Logion
? Economists‖ on some level are
mathematicians,historians,diplomatists,
philosophers… and they are as indifferent and
honest as artists‖,
——John Maynard Keynes
? ―When economists are analyzing economical
affairs or public policies,they are always
remembering different models。,
——Gregory Mankiw
Main Contents
? 1.1 Objectives and scopes of
macroeconomics
? 1.2 Chinese macroeconomic facts
? 1.3 Nature of Macroeconomics
Analysis
? 1.4 Brief history of Macroeconomics
? 1.5 Methodology of Macroeconomics
? 1.6 Features of This Text
1.1 Objectives and Scopes of
Macroeconomics
? Microeconomics,
To take the behaviors of single corporation or
familiar as research objects,which aims to know
the relationship between demand-supply
behaviors and price changes,
Macroeconomics,
To focus on operational situation of the whole
economy in one country and how the government
uses economical policies to influence the
operation of the whole economy in one country.,
1.1 Objectives and Scopes of
Macroeconomics
Content One,
Economic Growth in the Long Term
? Growth resources
?Increase of Labor Force
?Average person productivity increase
U.S,average actual GDP from 1900
to 2000
1.1 Objectives and Scopes of
Macroeconomics
Content Two,Business Cycle
?Different characteristics of business cycles
?Various explanations of periodic fluctuation
1.1 Objectives and Scopes of
Macroeconomics
Content Three,Unemployment
?Basic concepts
? Those who have the working ability and look for works
but can not get them
?Measurement
? Unemployment populace is divided by total labors
Americans’ unemployment ratio from
1900 to 2000
1.1 Objectives and Scopes of
Macroeconomics
Content Four,Inflation
? Basic concepts
? Prices of most commodities and services keep increasing
during certain time in one economy,
?Reasons
? Issued too many currencies,overmuch demands for
investment and consumption,increase of cost such as
wages
U.S,Inflation Ratio from 1900 to 2000
1.1 Objectives and Scopes of
Macroeconomics
Content Five,International Economy
? Close economy
? Open economy
? Inflation will transmit between different countries
? Trade surplus and deficit will influence domestic
employment and government revenues
Rate of growth export
commodities （ %）
Average annual rate of
growth14.15%
1.1 Objectives and Scopes of
Macroeconomics
? China’s gross foreign export
value （ 100 million dollars）
1990 620.9000
1991 718.4000
1992 849.4000
1993 917.4000
1994 1210.100
1995 1487.800
1996 1510.500
1997 1827.900
1998 1838.100
1999 1949.300
2000 2492.000
2001 2661.000
0
10
20
30
40
90 91 92 93 94 95 96 97 98 99 00 01
1.1 Objectives and Scopes of
Macroeconomics
Content Six,Policies of Macroeconomics
?Fiscal policies
? Constituted by government tax policies and expenditure
policies
?Monetary policy
? How to decide and adjust the currency’s supply rate under the
control of central government in one country
1.2 Chinese Macroeconomic
Facts
Growth and fluctuation of Chinese economy
?Sources of growth
? Increase of Labor Force
? Increase of per-capita productivity
年份
1.2 Chinese Macroeconomic Facts
——Economic growth and fluctuation
NI
gr
ow
th
ra
te
（%
）
-30
-20
-10
0
10
20
30
50 55 60 65 70 75 80 85 90 95 00
? Before1978,unemployment and inflation were both
recessive; after reform and opening-up,unemployment and
inflation became a pair of contradiction in Chinese macro
economy,
index of retail price（ last year=100） Urban registered jobless rate
（ %）
1.2 Chinese Macroeconomic Facts
——Unemployment and inflation
95
100
105
110
115
120
125
78 80 82 84 86 88 90 92 94 96 98 00
1.5
2.0
2.5
3.0
3.5
4.0
78 80 82 84 86 88 90 92 94 96 98 00
? Since 1979,one of very important changes of
Chinese macro-economy is the raise of opening
degree to the outside world
Year Import Export FDI
1980 200.17 181.9 18.02/4
2001 2436.1 2661.5 468.8
Unit,a hundred million $
1.2 Chinese Macroeconomic Facts
——opening to the outside world
1.3 Nature of Macroeconomic
Analysis
? Prediction on macro economy
? Analysis of macro economy
? Research of macro economy
? Treating the whole economic activities as a system,modern
macroeconomics aims at studying general trend of one economy
by analyzing the total process of this system,In another word,it
studies the whys and internal relationship between gross
economic facts,such as the determinants of gross output,gross
employment and average prices,and how these facts are
influenced by balance of payments or the change of exchange
rate,
1.3 Nature of Macroeconomics
Analysis
1.4 Brief History of Macroeconomics
mercantile system classical economics vulgar economics neoclassical synthesis
(early 15c -17c) （ mid 17c –early 19c） （ early 19c -20c30 ） (20c30 - )
<before
Manipulatory
manufacture>
<manipulatory
manufacture> Seedtime of capitalism Senior period of capitalism
Ex-history First period of capitalism
all kinds of
theory of value
theory of labor value
Hand invisibly
Animadvert on
feudal society
theory of marginal
utility value
Anarchism,free competition
Advocate capital society
theory of insufficient
effective demand
government
interference
Three times modify
1,monopoly（ Chamberlain and so on ）
a quantitative question
2,Keynesianism—a quantum problem
3,Ordinal utility and
general equilibrium
-a quantity problem
Samuelson
Grouped into
mixed
economy
70s
stagflation
School of monetarism
School of
rational expectations
School of supply
Classical macroeconomics model<marginal analysis method>
? System info of macroeconomics
Monetarism,Supply genre,Rational expectations genre
keynesian model
Equilibrium of product markets
Equilibrium of money market
Equilibrium of labor market
Neoclassical synthesis
AD curve（ Keynes’）
AS curve（ wage rigidity）
Philips Curve
Macroeconomic
policy
Explain
economical
operation
1.4 Brief History of Macroeconomics
Introduction,Milton Friedman
? Winners of Nobel Prize in Economics in 1976
? Study field,
? Consumption
? Monetary history and
monetary policy
? Hybrid use of stability policy
Introduction,Robert E,Lucas
? Winner of Nobel Prize in Economics in 1995
? Study field,
? Rational expectations
? Theory of neutrality of money
? Analysis of Transitional Economies
1.4 Brief History of Macroeconomics
? Early macroeconomics ideas
? Classical approach
? Keynesianism
? Monetarism
? Neoclassicism and neoclassical synthesis
? Supply genre
? Rational expectations genre
? Neoclassicism and neoclassical synthesis
?Hansen and Samuelson put forward theory of forty-five degree line。
?Solow and others set up neo-classical growth model
?Philips put forward Philips Curve,to explain inflation
? Hicks and Modigliani reached the state which is smaller than the
point of full employment based on Ns and Nd of Neoclassicism,（ r
can not fluctuate; traps; wage rigidity）
1.4 Brief History of Macroeconomics
? Neo-quantity theory
? Hypothesis of natural rate
? Policy allegation,agree with monetary policy,but oppose fiscal
policy,and meanwhile oppose the monetary policies which is after
considerations,and claims for single policy rules
),1,,,,,( ?dtdpprrrwyfPMm ebm??
1.4 Brief History of Macroeconomics
? Supply genre
? Theory core,supply
creates demand by itself
? Main analysis,supply
effect
? Main viewpoint,basic
single proposition about
marginal rate of tax
?Laffer’s Curve
Tax amount T
Tax rate t
O
t P
1.4 Brief History of Macroeconomics
? Rational
expectations genre
? Expectations and rational expectations,
concept and type
? Basic viewpoint,natural rate hypothesis; completely
invalidation of macroeconomic policies ； Microcosmic base of
macro-economics theory
Static expectations
Extrapolation
expectations
Adaptability
expectations
equal to actual amount of last term
actual amount of last term
and changes
actual amount of last
term and his errors
1.4 Brief History of Macroeconomics
?Difference between neoclassicism and New-
Keynesian
? Difference of basic hypothesis,whether market is clearing
? Different explanations of economical fluctuant,
neoclassicism explains it from supply changes of real factors,
while new-Keynesian explains it from demand changes of
monetary factors,
?Divergence of policies,neoclassicism,considering
economic policies invalid,opposes intervention in economy by
government,
1.4 Brief History of Macroeconomics
1.5 Methodology of Macroeconomics
? Macroeconomics synthesizes all markets of
one economical system into three markets：
money market,commodity market and labor
market,
? Macroeconomic analysis are based on single
behavior analysis of microeconomics
? Macroeconomics set up theory models with
necessary hypothesis,based on observation
of practical economic phenomena,and then
make use of data from actual world to verify
theory models,
1.5 Methodology of Macroeconomics
? When it comes to new problems and phenomena，
logistic structure of macroeconomics theory drawn
from macroeconomic research,is called
macroeconomics models,many of which are
expressed in mathematical linguistics
? Any macroeconomics textbook is full of so many
mathematical models that if one wants to success in
economic research he needs solid mathematical
foundation,
1.6 Features of This Text
? Basis of macroeconomics
? Further research and expansion of
theory systems
? Discussion of front-line research
Chapter 1
The End
0
10
20
30
40
90 91 92 93 94 95 96 97 98 99 00
