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    Document (2) (9) Macro

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    Natnael Tesfaye
    The document discusses two main topics in monetary macroeconomics: monetary macroeconomics which focuses on how monetary policy impacts economic variables like inflation and output, and real business cycle macroeconomics which argues that business cycles are driven by real shocks like technology changes rather than monetary factors.

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    Document (2) (9) Macro

    Uploaded by

    Natnael Tesfaye
    4 views2 pages
    The document discusses two main topics in monetary macroeconomics: monetary macroeconomics which focuses on how monetary policy impacts economic variables like inflation and output, and real business cycle macroeconomics which argues that business cycles are driven by real shocks like technology changes rather than monetary factors.

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    Macroeconomic

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    Document (2) (9)macro

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    The document discusses two main topics in monetary macroeconomics: monetary macroeconomics which focuses on how monetary policy impacts economic variables like inflation and output, and real business cycle macroeconomics which argues that business cycles are driven by real shocks like technology changes rather than monetary factors.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    4 views2 pages

    Document (2) (9) Macro

    Uploaded by

    Natnael Tesfaye
    The document discusses two main topics in monetary macroeconomics: monetary macroeconomics which focuses on how monetary policy impacts economic variables like inflation and output, and real business cycle macroeconomics which argues that business cycles are driven by real shocks like technology changes rather than monetary factors.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Monetary Macroeconomics

    Definition: Monetary macroeconomics focuses on the effects of monetary policy on the


    economy. It examines how changes in the money supply, interest rates, and other monetary
    variables impact economic variables like inflation, output, and employment.

    Key Concepts:

    Money Supply: Refers to the total amount of money in circulation within an economy.
    Interest Rates: The cost of borrowing money or the return on savings.
    Inflation: The rate at which the general level of prices for goods and services rises.
    Role of Central Banks: Central banks play a crucial role in monetary macroeconomics by
    controlling the money supply through tools like open market operations, reserve requirements,
    and setting interest rates
    Real Business Cycle Macroeconomics

    Core Principles: Real business cycle theory posits that fluctuations in economic activity are
    primarily driven by real shocks such as changes in technology or productivity. It argues that
    business cycles are efficient responses to these shocks rather than due to nominal factors like
    monetary policy.

    Key Features:

    Technology Shocks: Changes in technology can lead to shifts in production possibilities and
    drive business cycles.
    Labor Market Dynamics: Fluctuations in employment and output are seen as responses to real
    shocks rather than nominal factors.
    Neo-classical 1870 – 1936.

     Neoclassical economics refers to a general approach in economics focusing on


    The determination of prices, outputs, and income distributions in markets Through supply and
    demand.IT brought the Concept of utility as the key factor in determining value in contrast to the
    Classical view that the costs involved in production were value’s determinant.The neoclassical
    approach became increasingly mathematical, focusing on Perfect competition and equilibrium
    Decisions on economic issues are always made rationally based on Full information on the
    usefulness of goods and services
     Consumers compare goods and then make the purchase decision Based on the perceived utility
     The customer’s main objective is to capitalize on the satisfactionAfforded by the use of the
    product
     The main aim of the company is to maximize profits
     Market equilibrium is achieved only when both the customer and The company achieve their
    respective goals

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