Economics 100B - 2 (1-18-07)

Economics 100B - 2 (1-18-07) - Economics 100B Professor...

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Economics 100B Professor Steven Wood 1/18/07 Lecture 2 ASUC Lecture Notes Online (formerly Black Lightning) is the only authorized note-taking service at UC Berkeley. Please do not share, copy or illegally distribute these notes. Our non-profit, student-run program depends on your individual subscription for its continued existence. These notes are copyrighted by the University of California and are for your personal use only. Sharing or copying these notes is illegal and could end note taking for this course ANNOUNCEMENTS Today’s Agenda: Today we will cover the two main types of variables in our economic models. Key Endogenous Variables – The variables we are trying to explain Key Exogenous Policy Variables – The variables that help us find our endogenous variables. Usually determined by the government. LECTURE Macroeconomic Goals: Determined by the governments as representatives of society Final Goals usually shared by all governments: 1) Fast economic growth – Fast, but not uncontrolled economic growth. 2) Smooth economic growth – A lot of volatility in economic growth is not considered desirable even if it is fast growth. There might be a tradeoff here, smoother growth might require slower growth; this has not been proven however. 3) Low Unemployment: We would like the amount of people who want a job, but are not working, to be relatively low. Not necessarily zero as we will see later. 4) Low Inflation Note that all of these goals might not be achievable. There are tradeoffs associated with them. Major Macroeconomic Variables 1) Economic Output: How fast and how smooth the economy is growing. a. Long-term economic growth. b. Business fluctuations (short- term) 2) Unemployment and Employment 3) Inflation Key Macroeconomic Variables 1) Interest Rates 2) Government budget balance 3) International Trade Balance 4) Productivity While we might not want to explain all of these things, they are variables that are thought about everyday in economics. You are always hearing about trade deficits and budget deficits, what cause these things and what are their effects? You will always see these questions in the news and in policy discussions. Economic Output
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