PP_Slides_Class_22_Monday_April_7

PP_Slides_Class_22_Monday_April_7 - Good Morning Class 22...

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Good Morning!! Class 22 Monday, April 7
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1. Fiscal policy is subject to each of these lags except the __ lag. a. impact b. money c. recognition d. decision
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fiscal policy monetary policy sectors impacted: consumption investment government (housing) foreign
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Other considerations 1. national debt is so large and budget deficits are so large that increasing the budget deficit to fight recession is not really possible
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1. international capital flows reduce the effectiveness of monetary policy example: the Fed decreases the money supply which increases interest rates but capital flows increase which increases the money supply
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we learned in chapter 2 economic growth is the PPC (production possibilities curve) being pushed out
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Production Possibilities Curves
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in chapter 2 we learned that the PPC gets pushed out when: -more labor -more capital -technological increases
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also in chapter 2 we learned that a nation that concentrates on producing capital goods gets a faster rate of economic growth
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Capital Spending and Economic Growth
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2. Labor productivity is measured by a. the ratio of capital to labor b. real output per worker hour c. real output per capita d. the ratio of worker hours to real GDP
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Edward Denison studied US 1929 – 1982 economic growth: ½ due to more labor and more capital ½ due to increased productivity (think of productivity as technological increases)
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productivity = output per unit of input worker productivity = output per hour worked output worker productivity = hours worked
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What would make productivity increase? -same output, fewer hours worked -more output, same hours worked -more output, fewer hours worked
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if workers have “better tools”, they can “make more” in the same amount of time problem: lower savings rate leads to lower investment rate
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if workers are “better trained,” they can “make more” in the same amount of time problem: falling educational standards lead to declining quality of labor
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other problems: -rising health care costs -restrictions on immigration -increased military and security spending
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productivity has increased despite the
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