Read the summary and the most important questions on Macroeconomics, Global Edition | 9781292160504 | Olivier Blanchard

• 1 Tour of the world

• 1.2 The United States

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• How big is the country in economic point of vieuw, look at?

  Output

• 1.2.1 Low interest rates and the zero lower bound

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• Federal funds rates

  Fed who tries to control the interest rates

• Why are low interest rates a potential issue?

  1. Limits ability for Fed to further respond to negative effects
  2. Leads to excessive risk taking by investors

• 1.3 The Euro area

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• Euro Area (common currency area)

  Process of replacing the national currencies for the Euro
  This was done by fixing the value of its current currency to the euro

• Which 2 main issues does the Euro area face?

  1. How to reduce unemployment?
  2. Whether and how to function efficiently

• 1.4 China

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• Why is there so much attention paid to China?

  1. Output per person
  2. The rapid growth of China

• Where has the high growth in China come from?

  1. High accumulation of capital (investment rate) -> more capital = higher productivity & higher output
  2. Rapid technological progress -> encouraging foreign firms to relocate and produce in China (increased productivity & output). Also encourage joint ventures between foreign and Chinese firms (increase productivity)

• 2 A tour of the book

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• 2.2 The unemployment rate

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• Why do economists care for unemployment?

  1. Unemployment has a direct effect on the welfare of the unemployed (financial and psychological suffering)
  2. Unemployment rate provides a signal that the economy is not using some of its resources

• 2.3 The inflation rate

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• Why do economists care about inflation?

  1. Inflation affects income inflation
  2. Inflation leads to other distortions (investment decisions, higher tax brackets)

• 4 Financial Markets 1

• 4.1 The demand for money

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• The interest rate on bonds

  The higher the interest rate, the more you will be willing to deal with the hassle and costs associated with buying and selling bonds