notes12spring2018.pdf - MACROECONOMICS 201 Spring 2018...

Info icon This preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
MACROECONOMICS 201 Spring 2018 NOTES 12 STABILIZATION: METHODS, CONFLICTS, DISAGREEMENTS, AND OBSERVATIONS Reading Assignments: Principles of Economics: Chapter 14, Chapter 26 (section .2) Madariaga: 30,31 Clearly, modern economies wish to achieve a low level of unemployment, a low level of inflation, and rising annual economic growth. Equally clearly, there are many fiscal (spending and taxing) and monetary tools which can help achieve these goals, if used in a wise and timely fashion. There are few economists who deny that these tools can be used to alter AD (or AE). In that sense, most economists are Keynesians, even though they may not agree with the specific policy recommendations that Keynes made during the depth of the great depression of the 1930's. Why then, is there so much controversies over which of these many tools to use, how extensive their use should be, and the timing of their use. 1 . How successful has Macroeconomic policies been in stabilizing the economy? But first, we should note, stabilization policy since WWII has been reasonably successful, at least up until the time of the recent recession, primarily in terms of limiting unemployment and inflation to “tolerable” levels. We have not had the massive unemployment that people who lived through the great depression of the 1930s feared, nor have we had runaway inflation. Perhaps this should be qualified by noting that we have been less successful in these areas than it was hoped we would be at the end of WWII and the increasing acceptance of Keynesian thinking at that time. This phenomenon is currently being investigated in detail by economists. But, it must be noted that beginning immediately after WWII, the country began a slow inflation (with a few ups and downs) that has been continuous, and shows no sign of abating, a source of continuing controversy. Inflation has been progressing at roughly 2% per year, and this has become an acceptable rate of inflation to most central banks around the world, including the Federal Reserve in the U.S.. . We, in the U.S. have managed to keep inflation down to approximately the 2% level (over time) in several ways, among which are: We imported cheap labor to keep the costs of production down; We imported cheap merchandise from other countries (always complaining, of course, that it undercuts U.S. manufacturers and U.S. employment levels); There have been remarkable improvements in productivity that has allowed us to produce goods and services cheaper and sell them for less. For example, the use of secretaries for executives has plummeted due to the use of word processors. This is unlikely to continue indefinitely . Despite the current emotional dialogue over immigration, the ability of this country to continue accepting vast numbers of impoverished immigrants is
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
2 limited, and draconian laws to limit immigration may loom in the future, in fact, may be on the horizon.
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern