Lecture%2027%20-%20Macroeconomics%20II

Lecture%2027%20-%20Macroeconomics%20II - FIN 501 Financial...

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    1 FIN 501 Financial Economics Lecture 27: Macroeconomics II Professor Nolan Miller
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    2 Announcements Problem Set #8 is due December 7. Remember: I drop the lowest problem set. But, you are responsible for this material on the final. Typo on PS#8.  Question 1b should read that the probability of M  is ¾ and the probability of N is ¼.  A corrected version is  available on Compass now.  Office Hours this week Thursday, Friday, by appointment.
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    3 Outline for today Measuring Inflation Production Growth The Monetary System Economic Indicators
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    4 Circular Flow Diagram II Households Firms Payments for goods and services Financial  System Saving Investment Foreign  Countries Pmts for Imported Goods Pmts for Exported Goods Government GDP is here! GDP includes: • Consumer spending • But not spending on         imports. •Investment •Government Purchases •Payments for Exports GDP = C + I + G + X - M Pmts for G&S
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    5 GDP Grows Too Slowly to Fill Jobs Gap ( “Gross domestic product, the broadest measure of the goods and services produced by the  economy, rose at an inflation-adjusted annual rate of 2% in the third quarter, up from 1.7% in  the second quarter , the government said Friday.” Investment (I):  “Businesses increased investment in equipment and—for the first time in more than  two years—in buildings.” “Much of the third-quarter growth came from businesses building inventories, an  unsustainable source of growth.” Consumption (C):  “Consumer spending accelerated, marking its strongest growth since late 2006, though  much of the added spending went for imports.” “Exports of goods and services grew at a 5% pace, but imports rose 17.4%.” Residential construction plunged in the wake of the expiration of the home-buyer tax  credit. Government Spending (G):   “State and local government spending contracted, as it has in  six of the past eight quarters.”
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    6 U.S. Third Quarter Second Gross Domes GDP estimates are constantly updated as new data come in. The “second” estimate for 2010 3 rd  Quarter came out 23 Nov. 2010. Increased estimated GDP growth rate to 2.5% (from 2%). “The increase in real GDP in the third quarter primarily reflected positive  contributions from personal consumption expenditures (PCE), private inventory  investment, nonresidential fixed investment, exports, and federal government  spending that were partly offset by a negative contribution from residential fixed 
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This note was uploaded on 01/18/2011 for the course FIN fin580 taught by Professor Miller during the Spring '10 term at University of Illinois, Urbana Champaign.

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Lecture%2027%20-%20Macroeconomics%20II - FIN 501 Financial...

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