Macroeconomics II - First meeting

Lecturer: Mr. Insukindro

What Is Macroeconomics ?
Macroeconomics is the study of behavior of large collections of economic agents. It focuses on the aggregat behavior of consumers and firms, the behavior of government, the overall level of economic activity in individual countries, the interactions among the nations, and the affect of financial and monetary policy. (Williamson:2011)

Models?
Model is abstraction of reality. The principal component of macroeconomics models include identities and definition, hypothesized behavioral relationships, and equilibrium condition.

There are two method to derive models

1. Comparative Static Analysis Approach.  Comparative Static Analysis is usefull area of study because in economics we are often interest in finding   out how a change in parameter will affect the equilibrium state of model. It is important to realized. By its very nature Comparative Static Analysis the process of adjustment fromthe old equilibrium to the new and also neglect the length of time required in that adjustment process.
2. Dynamic analysis approach.    For example our salary is Rp. 6.000.000,- per month, it means that our salary is rp. 200.000 perday (30 days in a month). We have set that money to 30 amplop to control the spending. Consumption  equation said that Y= C, In fact we have difficulties to spend our income exactly the same with our consumption. sometime more then income sometime  less than income. If in 8 th day our consumption more than 200 thousand, so we have to adjust either we take excess salary the day before that day or take next day allocated income. that is D always adjusynamic analysis approach. we have to always adjust. we have back looking analysis and Forward looking analysis in this approach.