Lecture 5 - 1 1 Short-Run Keynesian Model& Business...

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Unformatted text preview: 1 1 Short-Run Keynesian Model & Business Cycles ¡ Business Cycles – Economic Fluctuations ¡ Economic Indicators ¡ The Recent Recession ¡ The Keynesian SR Model ¢ Aggregate Demand & Expenditure ¢ Equilibrium and 45 degree line/Keynesian cross analysis ¢ Multiplier ¢ Consumption, Saving, Investment 2 In the News? 3 Course Issues ¢ Clicker update / prize/ not registered ¢ ODE ¢ HW results ¢ Academic Dishonesty ¢ TOC ¢ Deadlines, etc. 2 4 About Business Cycles ¡ Economic Fluctuations rather than cycles – irregular, not periodic ¡ 10 in post WWII NBER ¢ Average contraction 10 mos, expansion 57 mos ¡ Chronology: ¢ stock prices and other leading indicators 6-12 mos ¢ Decline in investment and aggregate demand ¢ Increase in inventories (unintended) ¢ Decline in gdp ¢ Decline in employment, prices, interest rates, profits, but generally not wages 5 Causes? ¡ Keynesian – Demand shocks – Investment related ¢ Propagated By Internal Dynamics – multiplier accelerator model ¡ Shocks? ¢ Inappropriate monetary policy ¢ Financial Crises ¢ Supply-side/Technological ¡ Exogenous causes versus endogenous dynamics (multiplier accelerator) ¡ Discredited Business Cycle Theories Economic Waves ¢ Kitchin inventory 3–5 years ¢ Juglar fixed investment7–11 years ¢ Kuznets infrastructural investment 15–25 years...
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Lecture 5 - 1 1 Short-Run Keynesian Model& Business...

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