9-15-09 - ECONOMICS 100B Professor Martha Olney 9/15/09...

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ECONOMICS 100B Professor Martha Olney 9/15/09 Lecture 6 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. ANNOUNCEMENTS Problem Set 2 is now available. I will let you know soon whether or not we will have class on the day of the walkout. LECTURE Outline Overview of Economic Growth Production Function Questions of Growth Meaning of Equilibrium Overview of Economic Growth In macroeconomics, there are two big issues that we are concerned with, long-run growth and short-run fluctuations. One way to conceptualize this is to think that an economy combines inputs, knowledge, and efficiency to produce a potential amount of output for the economy, Y *. The “*” denotes potential output. This is a point on the Production Possibilities Frontier at which an economy efficiently uses all of its resources to produce goods. We begin with the desired amount of spending: C+ I + G + NX, which yields how much output is actually produced, Y. The gap between potential output and actual output is the essence of short-run fluctuations. In the current economic situation, our desired spending level is low so that actual output is low relative to our potential output. When such a gap exists, it is a sign of a recession. For the first part of the course, we will be examining the top relationship, the one between inputs, knowledge, efficiency, and outputs. In the next couple of weeks, we will be looking at where our economy should by examining generation to generation patterns of change in standards of living and output produced per capita. We will concern ourselves with the second relationship later on in the course. When contemplating this question of long-run economic growth, we are thinking about potential output and can depict this with a graph.
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Economics 100B ASUC Lecture Notes Online: Approved by the UC Board of Regents 9/15/09 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
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9-15-09 - ECONOMICS 100B Professor Martha Olney 9/15/09...

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