Macro2 - Macroeconomics 2 2/21 Wednesday Current Events:...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Macroeconomics 2 2/21 Wednesday Current Events: CPI- consumer price index – increase .2% last month Class Notes Solow- Saving drives long run supply growth Total Savings= Private Savings + Public Savings + Net Foreign Savings Low Savings Poor Countries (Bolivia, Bhutan, Afganistan, Iraq…) Summary of Semester Supply Side PPF Solow Demand Side GDP Business Cycle 1) Recession 2) Recovery 3) Peak 4) Downturn 5) Goldilocks Business Cycle AS- Aggregate Supply Supply Side growth in potential output or capacity (graph of agg. Supply/demand zoe) yf: full employment rate of unemployment = 4%-5% As we move from the left of yf along AS curve towards yf, the economy will: 1) Increase output 2) Increase capacity utilization 3) Lower unemployment rate w/o increasing inflation rate (graph zoes notes) As output increases along AS to the right of yf, there is little change in real GDP Primarily, prices increase = increase in inflation rates 1) Increase in labor cost 2) Increase commodity prices
Background image of page 1

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

View Full DocumentRight Arrow Icon
3) Increase PPP (producer price) a. With strong consumer demand, increase prices and inflation Macroeconomic Equilibrium: Aggregate Demand: AD = GDP = C+I+G+NX =C(y-T)-I(r)+G+NX Year= 0 (1x year…beginning and will advance year by year) AD is less than required for full employment yf -Excess capacity Assume recession We decrease taxes (T) and the fed can lower interest rates (r) Year=1 AD responds positively to the expansionary MP + FP (graph) 1) Supply Side growth a. Labor force (1%) + worker productivity (2%) = 3% b. AS “0” AD “1” 2) Demand Side Growth a. AD “0” AD “1” New Macroeconomics equilibrium but, Unemployment rate > yf with excess capacity Recovery w/o inflation 2/23 Friday Current Event -Venezuela President Chavez Oil=high preserves Increase in public government spending by 50% in 2006 Since 2004. .Increase by over 100% Increase interest rate 18.4% Price controls Social control Shortages Currency = Bolivia Telephone and electricricity nationalize Currency outflow of private savings have substantial decrease = Bolivia deprecation =Increase prices of imports Large firms and ranches – breaking them up and dividing land to individual families =inefficient
Background image of page 2
Government needs to step when market is not flowing correctly -Need to fulfill needs that private sector will not fill <i.e. police, fire…> Worker productivity will suffer as government intervenes too much Better to have large farms then small self-sufficient farms Stick with private sector as much as possible Problems being caused by oil Abundant in oil but poorly exported and things? -Falling into economic crisis
Background image of page 3

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

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

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.

Page1 / 10

Macro2 - Macroeconomics 2 2/21 Wednesday Current Events:...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online