chapter+6+Keynesian+cross+Aug+2009

chapter+6+Keynesian+cross+Aug+2009 - 1 Macroeconomics as a...

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1 Macroeconomics as a Second Language Chapter 6 (12): Keynesian Cross Martha L. Olney [email protected] July 2009 Most of macroeconomics focuses on the short run – on quarter-to-quarter and year-to-year changes in output and employment. How much output the aggregate economy produces in any year depends upon how much output all of the buyers want to buy. In the language of economists: in the short run, real GDP depends upon aggregate demand. Key terms and concepts $ Aggregate demand $ Employment $ Labor force $ Out of the labor force $ Output $ Real GDP $ Real gross domestic product $ Planned aggregate expenditure $ Inventory Chapter 6 (12): Keynesian Cross (v.1 July 2009) Page 1 of 33
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$ Inventory accumulation $ Inventory depletion $ Macroeconomic equilibrium $ Circular flow diagram $ Keynesian cross diagram $ 45 line ̊ $ Intersection point $ National income and product accounts $ Net taxes $ Taxes $ Disposable income $ The income approach $ Receipts of factor income from the rest of the world $ Payments to factor income from the rest of the world $ Gross national product $ Net national product $ Statistical discrepancy $ National income Chapter 6 (12): Keynesian Cross (v.1 July 2009) Page 2 of 33
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$ Compensation of employees $ Rental income $ Net interest $ Taxes paid on production and imports minus subsidies $ Surplus of government enterprises $ Personal income $ Disposable personal income $ Personal saving $ Personal saving rate Key equations $ Macroeconomic equilibrium exists when Y and real GDP = AD $ AD = C + I + G + NX $ T = TA - TR $ YD = Y + TR - TA = Y - T Key graphs $ Circular flow diagram $ Keynesian cross Chapter 6 (12): Keynesian Cross (v.1 July 2009) Page 3 of 33
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There Is More than One Way to Approach Macroeconomics Macroeconomics is a story, a rather long story at that. Think of it as a novel, with characters introduced in the early chapters, the action unveiled in the middle chapters, and the characters’ experiences placed into a context in the final chapters. Reading just the first chapter won’t give you a sense of the story. Jumping in at the middle creates confusion about who is who. Reading only the last chapter leaves you baffled as to how it all fit together. For those who have studied microeconomics, the study of macroeconomics can be a bit of a jolt. Economists agree on what is to be taught in micro. In microeconomics, there is one story and one basic approach: start from supply and demand, then examine the various sources of market failure. Macroeconomics enjoys little of that agreement. Pick up six textbooks at random and you’ll probably find four – or more – different approaches to macroeconomics. Terminology accounts for some of the difference. But that’s not all. What order should the material be presented in? What topics should be included – and omitted? What relationships should be emphasized? While the companion volume
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This note was uploaded on 02/04/2011 for the course ECON 100B taught by Professor Wood during the Fall '08 term at Berkeley.

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chapter+6+Keynesian+cross+Aug+2009 - 1 Macroeconomics as a...

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