9-8-09 - ECONOMICS 100B Professor Martha Olney 9/8/09...

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ECONOMICS 100B Professor Martha Olney 9/8/09 Lecture 4 ASUC Lecture Notes Online is the only authorized note-taking service at UC Berkeley. Do not share, copy or illegally distribute (electronically or otherwise) these notes. Our 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. D O N O T C O P Y Sharing or copying these notes is illegal and could end note taking for this course. LECTURE Outline Stock Market GDP o History o National Income Accounting o C, I, G, and NX Accounting Identities you must memorize Federal Reserve Press Release The Federal Reserve press release said that in July, American consumers paid back debt at the fastest rate ever recorded. This can be translated into an increase in savings, which results in a decrease in consumption, all else held constant. We will not have the quarterly data until sometime in October or November, but this does not bode well for consumption spending in the third quarter of 2009. The unemployment rate increased to 9.7%. However, there was an increase in employment in the healthcare and education sectors. All other sectors displayed a decrease in the number of jobs. Student: The report indicated that 217,000 jobs were lost, which was about the number expected. But there was a larger increase in the unemployment rate than expected. Why is that? Remember the following equation: So the unemployment rate increased more than expected. This indicates that people gave up looking, so that the labor force shrunk in size. This is reflected in a smaller denominator. Another possibility is that more people stayed in the process of looking for work and did not abandon the labor force than had been anticipated. Please refer to the data released by the Fed. Student: What are future expectations based on since this recession is unlike any we have had in the past? Different economists based their expectations on different assumptions and models. Some may still be using the old models with assumptions based on historical data while others may have formulated new models for this recession. Stock Market Graph: Four Bear Markets This chart shows the peak of the stock market for major recessions as well as the descent from this peak. The gray line is for the Great Depression. The pink line is for 1973. The green line is for the
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Economics 100B ASUC Lecture Notes Online: Approved by the UC Board of Regents 9/8/09 D O N O T C O P Y Sharing or copying these notes is illegal and could end note taking for this course. 2 tech bust of 2000. The blue line is the current recession. Note that 9 years after the tech bust, we are still only 40% recovered relative to the peak in March of 2000. The worse of the current recession was the 56.8% decline in March of 2009 relative to the peak of October 2007. We define stocks are ownership shares in a
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9-8-09 - ECONOMICS 100B Professor Martha Olney 9/8/09...

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