Markets and the Macroeconomy IIStephen Kinsellastephenkinsella.net

Today

• Recap

• Equilibrium in the Markets

• Consumption, Saving, and Investment

The Macroeconomy is the sum of Supply

and Demand in Individual Markets

Household Behaviour

Consumption

Saving

Firm Behaviour

Equilibrium

Demonstration

The market clearing approach assumes that:

a. people are able to affect prices that influence their decisions.

b. firms are able to affect prices that influence their decisions.

c. prices adjust to clear markets.

d. all of the above.

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If the nominal wage rate is €10 per hour and the price level is 2, then the real wage a worker earns is:

a.five units of goods per hour.

c.twenty units of goods per hour.

b.eight units of goods per hour.

d. one-fifth unit of goods per hour.

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If the principal of a bond is €1000, it matures in a year and the interest rate is 6%, then at the end of the year the lender will receive:

a.€1000.

c.€60.

b.€1060.

d.€940.

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086 399 83 06

Next Time: Read Barro, chapters 7, 8.