handout9 - Elements of Macroeconomics Handout #9 1. An...

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Unformatted text preview: Elements of Macroeconomics Handout #9 1. An Application Housing & Financial Market Crisis Nominal Wealth = A0 = Financial Assets (Money, Stocks, etc) + Durable Goods Assets (Value of House, etc) - Liabilities (Mortgage, etc) 2. House Prices S&PICase~ShiHer Home Price lndices \ 10 (my Congas:st y ‘ a “VA I , ‘ :§ w&- 13% E = u 3 E *3 :1 3: m zo-cuy 4% I; ‘ g! Campwiu; g ‘ 5 «n :5 (1% 0% 9 22:; ,/ E .r a g as .454. 4% g 43% 42% - .1 5% «20% ‘ 3956 19% $992 1994 1996 1998 2000 2002 2004 2006 Source: Standard & Peers 8. Figarv 3. Dow Jones Industrial Average DJ INDU AVERHBE (DOM JONES & CD as 0? 9—Oct—2008 0.0 Copyright 2008 Yahoo! Inc. http :I/Finance .yahoo .com/ 4. Effects of Decline in Nominal Wealth - $140: $C:>J«E:>¢Yd - Capturedby a shift to the left of AD curve 5.. Graph: Effects of M0 6. Credit Market Effects - Tight credit markets - Declines in > Purchases of New Houses > Purchases of New Plant & Equipment > Consumer Durables Spending (e.g., Autos) - Decline in investment Spending & Further Decline in Consumption Spending 7. Tight Credit Market Effects: APreview 8. Other Aggregate Demand Shocks - Other Important Forces that cause shifts in planned spending: > State of Confidence of Consumers > Fiscal Policy > Monetary Policy > international Developments: - Exchange rate fluctuations - Expansion or recession abroad 9. Aggregate Supply Shocks o 5 3m,Zo,TE09KO) 1331:3333; Determines the Position of AS - Aggregate Supply Shocks -——Changes in variables that determine the position of AS 10. Types of Aggregate Supply Shocks - Adverse Aggregate Supply Shocks: Changes in Variables that shift AS to the left. Examples: TWO, T20, lTEo, or lKo - Favorable Aggregate Supply Shocks: Changes in Variables that shift AS to the right. Examples: ~LW0, lzo, TTEO, or TKO AUUO @IDP‘KKEL Crude Oil Prices 2007 Dollars OPEC 10 % Quota Increase PDVSA Strike Asian Econ Crisis [raq war \ Asian Growth Weaker Dollar Series of OPEC Cuts \ 4.2 Million Barrels lranian Revolution $0 I l I 47 4'9 5‘1 53 55 57 59 6163 65 67 69 7173 75 77 79 8183 85 87 89 9193 95 97 99 01 O3 05 07 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 1947 - May 2008 WTRG Economics ©1998-2008 — U.S. 1st Purchase Price ( Wellhead) -——-—- "Woricl Price" * WWWthFQ-Com (479) 293-4081 M'- Avg U.S. $24.98 ~~~~~~~~~~~~~~~~ " Avg World $27.00“‘"“‘““‘"""'Median U.S. & World $19.04 12. Adverse AS Shock: An Example-- T Zo AS’ ? As amwzb V 14. Real World Examples Adverse Supply Shock L” ’ """""§Favorable Supply 3.70% ,, ...
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This note was uploaded on 01/27/2009 for the course ECON AS.180.101 taught by Professor Maccini during the Fall '08 term at Johns Hopkins.

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handout9 - Elements of Macroeconomics Handout #9 1. An...

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