Macro 6 & 7 - feb 8

Macro 6 & 7 - feb 8 - Chapters6&7 GDP Growth...

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GDP Growth Instability
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The Macro Economy Aggregates Consumption-  (consumers spending) Demand  (demand for all goods/services),  Investment, Spending, Savings Long Term growth Output  (Q),  standard of living Short run variability—recession Economic Indicators Real / Nominal GDP, Inflation,  Unemployment.
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Economic Growth Economic Growth  is the result of: Economic Investment-  the firm invests in new  equipment, ect. Population Growth Productivity Savings and Investment Consumers Income:  they can spend or save Consumer Investment  (stocks, bonds, savings  accounts)  and Firms Investment  (to expand/ improve  business) Savings and Investment Banks
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Economic Growth Uncertainty, Expectations, Economic  Shocks Expectations and Reality :  when the  unexpected happens Economic Shocks : can be positive or negative Demand caused Shock Supply caused Shock Most short run changes in the economy  come from Demand Shocks.
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The Firm and Prices Demand Shock Output prices are  flexible-  prices can change Consider a set or  fixed quantity of  output  (supply) Full use of resources  at Q* and P* Increase in demand Price will change. Prices are “sticky” in the  short run –  “sticky” =  move slowly Fixed Supply Q*            Quantity Price Supply D        D’ P’ P*
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Demand Shock Output prices are  inflexible-  prices don’t  change Consider fixed prices  and  variable quantity  of output Full use of resources  at Q* and P* Increase in demand Quantity of output will change.
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This note was uploaded on 02/23/2010 for the course ECO 114 taught by Professor Shannan during the Spring '08 term at Bryant.

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Macro 6 & 7 - feb 8 - Chapters6&7 GDP Growth...

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