📖 宏观综合复习

Economics

I. Lesson Focus

This review lesson integrates the major macroeconomic frameworks covered in the CFA Level I curriculum: the aggregate supply–aggregate demand (AS-AD) model, the IS-LM model, monetary and fiscal policy transmission mechanisms, the Phillips curve, business cycles, and open-economy issues including balance of payments and exchange-rate determination. Candidates must be able to combine these tools to predict the effects of policy mixes on output, inflation, interest rates, and exchange rates.

II. The Problem

An economy is experiencing simultaneous inflationary pressure and slowing growth. The central bank is considering raising interest rates while the government plans to widen the fiscal deficit. An analyst must determine the net effect of these policies, possible policy conflicts, the likely direction of the currency, and the impact on the balance of payments. Failure to integrate the AS-AD framework, IS-LM equilibrium, money multiplier, Phillips curve, and interest-rate parity will lead to incorrect forecasts. This integration is a core CFA Level I macroeconomics testing point.

III. Core Frameworks for Macroeconomic Analysis

The primary tool for analyzing output, price level, and employment is the aggregate supply–aggregate demand (AS-AD) model. The AD curve slopes downward due to the wealth effect, interest-rate effect, and exchange-rate effect. Aggregate supply has a short-run component (SRAS, upward-sloping because of sticky wages and prices) and a long-run component (LRAS, vertical at potential output).

The IS-LM model is another key framework: - IS curve: goods-market equilibrium where $Y = C + I + G + (X - M)$. Investment (I) is negatively related to the real interest rate (r). - LM curve: money-market equilibrium where real money supply $M/P$ equals liquidity demand $L(Y, r)$. Money demand rises with income and falls with interest rates.

Equilibrium occurs where both markets clear. Expansionary fiscal policy shifts IS right; expansionary monetary policy shifts LM right.

IV. Transmission Mechanisms of Monetary and Fiscal Policy

Monetary Policy: - Expansionary actions (increase in money supply) lower interest rates, boosting investment and consumption, shifting AD right. - Primary tools: open-market operations, discount rate, and reserve requirements. - Simple money multiplier = $1 / \text{reserve requirement ratio (RRR)}$.

Fiscal Policy: - Expansionary policy (higher government spending $G$ or tax cuts) shifts AD right. - Crowding-out effect: government borrowing raises interest rates and partially offsets private investment. - Automatic stabilizers (progressive taxes and unemployment benefits) dampen the business cycle without discretionary action.

Policy Mixes: - Fiscal expansion + monetary expansion: large increase in output; interest-rate effect ambiguous. - Fiscal expansion + monetary tightening: higher interest rates, more stable output, currency appreciation.

V. Business Cycles, Unemployment, and Inflation

Business cycles consist of expansion, peak, contraction, and trough. Potential GDP growth is determined by labor, capital, and technology.

Unemployment: - Frictional, structural, and cyclical components. - Natural rate of unemployment = frictional + structural. - Okun’s law: for every 1% that unemployment exceeds the natural rate, the GDP gap is approximately –2%.

Inflation: - Demand-pull, cost-push, and built-in (wage-price spiral). - Short-run Phillips curve: inverse relationship between inflation and unemployment. - Long-run Phillips curve is vertical at the natural unemployment rate (no long-run trade-off).

VI. Balance of Payments and Exchange-Rate Determination

The balance of payments comprises the current account (CA) and the capital and financial account (KA). Roughly, CA + KA = 0 (ignoring official reserves).

Exchange Rates: - Nominal versus real exchange rate: real = nominal × (P_foreign / P_domestic). - Purchasing-power parity (PPP): long-run exchange rates are determined by relative price levels. - Interest-rate parity (IRP): uncovered IRP states $\frac{F}{S} = \frac{1 + i_d}{1 + i_f}$; currencies with higher interest rates are expected to depreciate. - Mundell-Fleming model (open-economy IS-LM): under floating exchange rates, monetary policy is more effective; under fixed rates, fiscal policy is more effective.

Worked Cases

Case 1: Combined Monetary and Fiscal Policy Effects

An economy is at equilibrium output of 10,000 billion, potential output 10,500 billion, and interest rate 5%. The central bank lowers the reserve requirement from 10% to 8% while the government increases spending by 500 billion (MPC = 0.75). Assuming no crowding out, calculate: 1. Change in the money multiplier. 2. Fiscal multiplier. 3. Approximate total shift in aggregate demand.

Solution: 1. Initial multiplier = 1/0.1 = 10; new multiplier = 1/0.08 = 12.5, an increase of 25% in money-creation capacity. 2. Fiscal multiplier = $1 / (1 - 0.75) = 4$. 3. Government spending of 500 billion generates 500 × 4 = 2,000 billion increase in AD. Combined with monetary easing, output rises further, interest rates likely fall, and the economy moves toward potential GDP.

Case 2: Phillips Curve and Stagflation

A country has a natural unemployment rate of 6%. Current unemployment is 4% and inflation has risen from 2% to 7%. Determine whether stagflation is occurring and the implied SRAS shift.

Solution: Unemployment below the natural rate implies a positive output gap and demand-pull inflation; SRAS has not shifted left. If a subsequent supply shock (e.g., oil-price surge) shifts SRAS left, pushing unemployment to 8% and inflation to 10%, the economy experiences stagflation (high inflation + high unemployment).

Case 3: Exchange Rates and Policy in an Open Economy

Country A’s central bank raises rates 100 bp, taking the domestic rate from 3% to 4% while the foreign rate remains 2%. Assuming no risk premium and using uncovered interest-rate parity, predict the immediate and expected movement in the spot exchange rate and the likely current-account response.

Solution: Higher domestic rates attract capital inflows, causing immediate appreciation of the domestic currency. According to IRP, the currency is then expected to depreciate over time to offset the interest differential. The capital and financial account moves to surplus; the current account is likely to deteriorate (appreciation reduces exports and raises imports).

Traps

Key Formulas

• Fiscal multiplier = $1 / (1 - MPC)$
• Simple money multiplier = $1 / RRR$
• Okun’s law: $\frac{Y - Y^}{Y^} \approx -2 \times (U - U_n)$
• Real exchange rate = nominal × $(P_f / P_d)$
• Uncovered interest-rate parity: $F/S = (1 + i_d) / (1 + i_f)$
• Money-market equilibrium: $M/P = L(Y, r)$
• Aggregate demand: $AD = C + I + G + (X - M)$

Practice Questions

Q1. In the IS-LM model, expansionary fiscal policy will:
A. Shift IS right, raise interest rates and output
B. Shift LM left
C. Increase output only, leaving rates unchanged
D. Shift LM right

Q2. If the central bank lowers the reserve requirement from 10% to 8%, the simple money multiplier:
A. Falls
B. Remains unchanged
C. Rises
D. First rises then falls

Q3. Which of the following shifts the short-run aggregate supply curve to the left?
A. Technological improvement
B. Sharp rise in oil prices
C. Increase in consumer confidence
D. Government tax cut

Q4. According to the Mundell-Fleming model, under floating exchange rates the most effective stabilization tool is:
A. Fiscal policy
B. Monetary policy
C. Both are equally effective
D. Capital controls

Q5. Stagflation is characterized by:
A. High growth and low inflation
B. High unemployment and high inflation
C. Low unemployment and low inflation
D. Occurrence only under fixed exchange rates

Q6. If domestic interest rates rise relative to foreign rates in a floating exchange-rate regime with perfect capital mobility, the domestic currency will:
A. Depreciate immediately
B. Appreciate immediately and may depreciate later
C. Remain unaffected
D. Depreciate continuously

Q7. The long-run Phillips curve is:
A. Downward-sloping
B. Vertical at the natural rate of unemployment
C. Upward-sloping
D. Dependent on monetary policy

Q8. Which of the following is most likely an automatic stabilizer?
A. Central-bank open-market purchases
B. Progressive income-tax system
C. Discretionary increase in infrastructure spending
D. Raising the reserve requirement

Answers

Takeaways

• The AS-AD framework is the central lens for output, price, and policy analysis; SRAS stickiness makes money non-neutral in the short run.
• Monetary policy works through interest-rate and exchange-rate channels; fiscal policy suffers from crowding-out; the policy mix determines net outcomes.
• The short-run Phillips curve shows a trade-off; the long-run curve is vertical at the natural unemployment rate.
• Exchange-rate regime matters: monetary policy is more powerful under floating rates, fiscal policy under fixed rates (Mundell-Fleming).
• Interest-rate parity and purchasing-power parity guide long-term exchange-rate forecasts.
• Mastery of IS-LM, the money multiplier, Okun’s law, and balance-of-payments identities is essential for integrated macro questions.