Macro1 - Macroeconomics 1/17/07 Class website:...

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Macroeconomics 1/17/07 Class website: spot.colorado.edu/~kaplan Microeconomics- -Markets and Firms -Consumer Models Analysis at an individual level Macroeconomics- -Gross Domestic Product = output by a country -Inflation = < 3% is desirable level -Unemployment Rate = 4% - 5% because people choose to be unemployed Examines countries economic standing world wide Policies -Federal Reserve…interest rate -Monetary Policy -Fiscal Policy War In Iraq History- 9/11 – bin Laden and Al Qada Invasion of Iraq on 1. Weapons of Mass Destruct. 2. Link Saddam and Al Qada March 20, 2003 -Invasion of Iraq as “war on terror” or “liberators” = LIES! Stiglitz and Bilmes -Paper describing long run war cost -CBO – majority of troops out by 2010 and full withdrawal by 2016 Cash Accounting- records expenses when payments are made –U.S. reports like this Accrual Accounting- records expenses when commitment is made How corporations record and Stiglitz and Bilmes reported Budgeting Cost July 2006 - $336 Govt budget surplus – revenue exceeds expenses Govt budget deficient – expenses exceed revenue 1/19/07 War on Iraq… Budgeting Cost 1. Spent to date -$336 million 2. Future spending on operations $389 billion 3. a. Veteran health care and disability compensation
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b. 3,000 dead; 30,00 wounded; 7,000 severely wounded; 200,000 treated (3x predicted) c. $127 billion through 4. Net increase defense spending a. 400,000 were reserved therefore they went from part-time reserve pay to full-time pay b. Recruitment cost have increased dc of war: $40,000/person $150,000/ special forces that re-enlist c. Depreciation of capital equipment (uniforms, guns…) maitinence is harder and 5x greater than predicted d. 150 billion through 2016 Total Cost is 1,012 billion –(or 1 trillion) U.S. treasury borrows money from savers throughout the world which expect interest payments) 5. Interest Expense a. $336 billion (until 2025): avg interest rate is 4% -Who will have to pay?? WE WILL!! DAMN IT Numbers 6,7,8 are not paid by government - Economic Cost 6. Net Economic Adjustments a. 300 million will have life long wounds = i. Loss of productive capacity (unable to produce goods and services for the next 30-40 yrs) (lost wage) ii. Multiply – lost in one persons job will effect others working opportunity and creates a multiplying effect on society b. Economic Value- 1 person is $6.5 million / with c. Total Cost - $355 billion 7. Supply side effect on oil a. Before War - $25/barrel b. Iraq = 2.5 million bpd “barrels per day” c. After War - $77/barrel d. Iraq = produces less then 1 million bpd e. Reduce global supply = price rise of $5 dollars … cont. through 2008 (5yrs) - U.S. imports 5 billion b/year f. Annual Cost = $5 x 5 billion = $25 billion g. Total Cost = $25 billion x 5 years = $125 billion over 5 yrs 8. Demand Side Effect of higher oil prices a. Less money to spend on other goods and services b. Gasoline is relatively inelastic (people will pay for higher prices)
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This note was uploaded on 04/02/2008 for the course ECON 2020 taught by Professor Kaplan,jul during the Spring '08 term at Colorado.

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Macro1 - Macroeconomics 1/17/07 Class website:...

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