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Unformatted text preview: 138 >> 000 WAS A VERY GOOD YEAR TO BE a new graduate of an American university or college. As one news- paper put it, companies were “tripping over themselves to entice graduating seniors with fat salaries and other perks.” 2000 was a particularly good year for students graduating with an MBA degree. But events were not nearly as kind to those who grad- uated just two years later. For many mem- bers of the class of 2002 at American business schools, graduation was not the happy occasion they had expected—a golden ticket to a well-paying job and suc- cess. Even at top business schools, such as Harvard, the University of Pennsylvania, and Stanford, stu- dents and faculty watched in disbelief as recruiters reneged on job offers that had already been ex- tended to hundreds of newly graduated MBAs. Months after commencement, many graduates still had not landed jobs. As shown in Table 6-1, gradu- ates who did find jobs typically re- ceived lower salaries than those of gradu- ates just two years earlier. (If you rank D I S A P P O I N T E D G R A D UAT E S What you will learn in this chapter: ➤ An overview of macroeconomics, the study of the economy as a whole, and how it differs from microeconomics ➤ The importance of the business cycle and why policy makers seek to diminish the severity of busi- ness cycles ➤ What long-run growth is and how it determines a country’s standard of living ➤ The meaning of inflation and deflation and why price stabil- ity is preferred ➤ What is special about the macro- economics of an open economy , an economy that trades goods, services, and assets with other countries 2 salaries from high to low, the median salary is the salary right at the middle.) There was nothing wrong with the new MBAs in 2002; they were every bit as tal- ented and motivated as the graduates two years earlier. And the phenomenon wasn’t limited to business school gradu- ates. The difference was that in the spring of 2000 the economy was booming, and employers were anxious to hire more peo- ple. In the spring of 2002 the economy was weak. Many firms were laying off employees and were in no hurry to hire more. As you can see from Table 6-1, by 2004 job prospects had improved somewhat; however, starting salaries still lagged behind the levels MBA graduates enjoyed in the spring of 2000. The alternation between boom and bust—between years in which jobs are plentiful and years in which jobs are hard to find—is known as the business cycle. But why is there a busi- ness cycle, and can anything be done to smooth it out? That’s one question ad- dressed by macroeco- nomics, the area of Even the best students had a tough time find- ing a job in 2002....
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