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lect09032009 - 12:43 PM Outline September 3 2009 Economic...

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Unformatted text preview: 9/3/2009 12:43 PM Outline September 3, 2009 Economic Problems & Issues, continued Today's Economy, continued Today' Consumption Spending Rose 3 Unemployment now nudging 10% 1980s 1990s 2000-04 2005 2006 2007 2008 Jul 2009 3-mo 8.85 % 4.88 % 2.66 % 3.16 % 4.73 % 4.36 % 1.37 % 0.18 % Interest Rates 10-yr 10.59 % 6.67 % 4.79 % 4.29 % 4.80 % 4.63 % 3.66 % 3.56 % Real vs Nominal 4 5 1 9/3/2009 12:43 PM Real vs Nominal interest rates Recession & Recovery Definitions Recession when output is declining Recovery when output is rising "End of recession" recession" "In Recovery" Recovery" Consumers can't lead us out of this recession can' 6 7 Household Saving Rate 1960s 1970s 1980s 1990s 2000-04 2005 2006 2007 2008 2009 Jul 8.3 % 9.6 % 9.1 % 5.2 % 2.1 % 0.4 % 0.7 % 0.6 % 1.8 % 4.2 % Collectively, we saved nothing How so? Credit. Credit cards are minor part of the story Home equity lines of credit are the key 8 9 2 9/3/2009 12:43 PM Housing Market It's all about supply and demand It' 13 3 9/3/2009 12:43 PM Labor Productivity Growth Rate 1960s 1970s 1980s 1990s 2000-04 2005 2006 2007 2008 2009:II all nonfarm business 2.8 % 1.9 % 1.0 % 1.8 % 3.5 % 1.7 % 0.9 % 1.8 % 1.8 % 1.8 % manufacturing only 2.8 % 2.9 % 2.8 % 3.7 % 4.2 % 4.8 % 1.0 % 3.2 % 0.8 % -1.3 % 14 Income Inequality 2007 2000 1990 1980 top 20% Income Above Share 47.3 % $112,638 47.7 % $110,017 44.3 % $94,564 41.1 % $83,372 Share 4.1 % 4.3 % 4.6 % 5.3 % bottom 20% Income Below $27,864 $28,897 $25,907 $24,916 Real Median Family Income 2007 2000 1990 1980 1970 $61,355. $61,083. $54,369. $50,366. $47,019. (+0.06% annually since 2000) (+1.2 % annually since 1990) (+0.8 % annually since 1980) (+0.7 % annually since 1970) (+3.2 % annually since 1960) Share of Income Received by Each 20% of Families, 1980 Share of Income Received by Each 20% of Families, 2007 Bottom 20% 4% Second 20% 10% Middle 20% 16% Bottom 20% 5% Second 20% 12% Top 20% 41% Middle 20% 18% Top 20% 47% Fourth 20% 24% Fourth 20% 23% 16 17 4 9/3/2009 12:43 PM Poverty Rates 2007 2000 1990 1979 Female-headed families 28.3 % (4.1 million) 26.4 % (3.5 million) 33.4 % (3.8 million) 30.4 % (2.6 million) All families 9.8 % (7.6 million) 9.2 % (6.8 million) 10.7 % (7.1 million) 9.2 % (5.5 million) People in poverty 12.5 % (37.3 million) 11.3 % (31.6 million) 13.5 % (33.8 million) 11.7 % (26.3 million) Stock Market (source: dshort.com)) dshort.com 18 19 In a rational market . . . Wealth-holders compare Wealth1. For each, what's effect on GDP? what's Carla, a public school teacher, is paid her monthly salary of $4,000. After taxes, her take-home pay is $3,200. She takeputs $400 into a retirement fund pays rent and utilities totaling $2,000 buys $100 worth of supplies for her classroom rate of return on stocks (Earnings / Price) rate of return on bonds (r = interest rate) 2. Carla buys 100 shares of stock, priced at $4.50 per share, and pays a $14.45 transaction fee to Schwab. 3. 20 Carla's 100 shares of stock increase in value to $600. Carla' 21 5 9/3/2009 12:43 PM Gross Domestic Product (GDP) History Keynes Kuznets C, I, G, GX, and IM Consumption ( C ) Investment Spending ( I ) National Income & Product Accounts Income Y Expenditure C + I + G + NX Government Purchases ( G ) Gross Exports (GX) Imports (IM) 22 23 Output GDP Why subtract IM? Consumer Goods & Services Produced In the U.S. Investment Goods Produced In the U.S. Government Goods & Services Produced In the U.S. Consumer g&s from abroad Investment goods From abroad Government g&s From abroad 24 6 ...
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