ECON 2HH3 Lecture Notes - Real Business-Cycle Theory, Procyclical And Countercyclical, Business Cycle
8 Mar 2014
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Document Summary
Study of the behaviour of large collection of economic agents. Long run growth is the increase in productive. We will look at microeconomics to build up on macro models. Lucas critique: macroeconomic policy can be evaluated in a sensible way only if macroeconomic behaviour is taken seriously. Business cycles: controversy about how we should right/model the business cycles. Link back to this chapter when look at future chapters about cyclical data. Below trend; stays for a while; on trend, above and so on . Suppose y is output and x is consumption: then x is procyclical. Nominal variables-price level: hard to tell by looking at it; this is where numbers are needed to calculate it. Assuming that each person"s tastes are the same; so knowing one persons; we know everyone"s. The consumer likes diversity in their consumption bundle. Budget ec = wh-we + (pie) t. Vertical intercept = wh + pie t (pie = 0)
