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Economics 100B - 11 (2-20-07)

Economics 100B - 11 (2-20-07) - Economics 100B Professor...

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Economics 100B Professor Steven Wood 2/20/07 Lecture 11 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 Re-Grade Policy The GSIs are still grading your exams. We hope to finish them by Thursday. Re-grades are available; the rules regarding them are posted on the website. A brief overview however: Æ Requests must be typed and submitted no later than the end of class on March 1 st . Æ The Whole exam will be re-graded Æ Points may be added or subtracted Æ In the past, very few grades have been changed. LECTURE News Hugo Chavez, the President of Venezuela, has actually nationalized aspects of the Venezuelan economy; I did not just make it up on the exam. There has been a tremendous amount of professional employees who are leaving Venezuela. This will likely lower n and possibly shift A down due to the high level of skill associated with these workers. Spain has been absorbing many immigrants and their economy is booming. This is consistent with our model; with more workers there should be an increase in Y. We have to be careful, however, and see if perhaps the income per worker has declined. The British economy has been experiencing many of the same things. Keep your eyes on the newspaper; you never know what will be on your next exam! Business Fluctuations and Output in the Short-Run Over the next four or five weeks we will be discussing the fluctuations in the economy that occur around our potential GDP. These fluctuations are also called business cycles. Potential Economic Output Potential GDP in the United States has been increasing fairly steadily over the last 45 years. When we look at the real GDP over the same period, we notice that real GDP fluctuates around our potential. We can also compare our deviations from potential using the output ratio Y/Y*. Whenever this value is above 1 we are above potential output, and when it is below 1 we are below potential. Components of a Business Fluctuation 1) Peak
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