Macroeconomics Notes 3-24-08 and 3-27-08

Macroeconomics Notes 3-24-08 and 3-27-08 - Macroeconomics...

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Macroeconomics Notes 3/24/08 and 3/27/08 - When the national pie grows, this is economic growth o Zero growth movement wants to keep the economy as it is - Sources of economic growth o Increases in aggregate demand o Increases in aggregate supply Two main sources Increases in input/factors of production Increases in productivity, such as through new technology - Economic growth comes in business cycles o Upwards growth is called a boom o Recessions and depressions are called busts o NOTE: booms and recessions do not affect all sectors of the economy equally; some are hit harder than others and some benefit more than others Hit hard in recession: Durable goods o Housing o Cars o Household appliances Service o Vacation, travel o Restaurants Recession-proof: Medical care Education Government o Two main concerns with the business cycle 1. Inflation in boom years 2. Unemployment in a recession - Inflation o Two types of inflation Demand-pull type due to rapid increase in aggregate demand Cost-push type due to rapid increases in costs of production (resulting from an upward shift in the supply curve) o The effects of inflation Hurts those on fixed incomes Discourages savings Banks rely on savings to loan money for investment Encourages imports and discourages exports Rapid price increases in the US cause foreign goods to become cheaper and US goods to become more expensive for foreigners o Example: US prices increase by 20% vs. rest of the world prices by 5%
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o Imports are a drain on the economy Creditors/debtors Inflation hurts creditors and helps debtors Example: there is a 100,000% inflation rate in Zimbabwe
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This note was uploaded on 04/12/2008 for the course ECON 100 taught by Professor Park during the Spring '07 term at American.

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Macroeconomics Notes 3-24-08 and 3-27-08 - Macroeconomics...

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