Lecture 16

Lecture 16 - 1 Econ 102 Fall 2008 Lecture 16 Is Fiscal...

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Unformatted text preview: 1 Econ 102 Fall 2008 Lecture 16 Is Fiscal Policy the Answer? 2 Topics Review of the Classical model Review of the Keynesian model Policy Monetary Policy Fiscal Policy Fed 2.0 3 Classical Theory Fundamentals Preferences Endowments Technology These determine gdp and employment 4 Keynesian Theory Fundamentals Preferences Endowments Technology Beliefs These determine gdp and employment Beliefs act as a fundamental 5 Inflation with no Uncertainty (Classical View) Expenditure in Dollars Employment in man hours Wage inflation Increase in the stock price 96% Employment stays constant at the natural rate Year 1 Year 2 6 A supply side boom Expenditure in Dollars Employment in man hours If wage inflation is slower than usual there is a boom Demand increases at the usual rate 96% Employment is temporarily high Year 1 Year 2 7 A supply side recession Expenditure in Dollars Employment in man hours If wage inflation is higher than usual there is a recession Demand increases at the usual rate 96% Employment is temporarily low Year 1 Year 2 8 A demand side boom Expenditure in Dollars Employment in man hours Wage inflation Increase in the stock price is bigger than usual 96% Employment is temporarily high Year 1 Year 2 9 A demand side recession Expenditure in Dollars Employment in man hours Wage inflation Increase in the stock price is lower than usual 96% Employment is temporarily low Year 1 Year 2 10 Is there a natural rate?...
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This note was uploaded on 09/27/2009 for the course ECON 102 taught by Professor Serra during the Fall '08 term at UCLA.

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Lecture 16 - 1 Econ 102 Fall 2008 Lecture 16 Is Fiscal...

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