Series
11 posts
Finally diving into real macro — breaking down GDP composition, inventory vs. fixed investment, and the consumption function from Blanchard Chapter 3.
We dig into the financial market — breaking down money demand, interest rates, and why splitting it from the goods market makes sense before we smash it all back into AD.
Finally deriving the IS and LM curves for real — dropping the constant-investment assumption and sketching out equilibrium in both the goods and financial markets!
We're done with the short-term goods and financial markets — now we crack open the medium term, which means the labor market and figuring out how wages actually get determined.
Picking up where we left off, we graph wage setting and price setting curves to nail down the natural unemployment rate — and yeah, it basically all comes down to markup.
Mashing together the short-run goods/financial markets and the medium-run labor market to derive the AD and AS curves — and spoiler: it still can't explain inflation lol.
A deep dive into AS-AD analysis — tracing exactly what happens to equilibrium when M drops, G rises, or firms jack up their markup, step by step.
We're finally zooming out to the long run — why do some countries keep winning? Enter Solow's aggregate production function Y = F(K, N), and the real fun begins.
We finally pin down that vague f(K/N) with the Cobb-Douglas production function and crank through the math to get a concrete steady-state output formula.
We finally stop pinning labor productivity A at 1, bundle it with N into 'effective labor' AN, and roll into the Solow residual framework for thinking about tech progress.
We patch up the IS-LM model to use r instead of i, then show why the medium-run always lands at Wicksell's natural real interest rate r(n).