Lecture1_2010_M - Intermediate Macroeconomics W3213 Prof...

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Unformatted text preview: Intermediate Macroeconomics W3213 Prof. Bruce Preston January 19, 2010 1 Today’s Outline 1. Course Overview: (a) Long-run economic experience (b) What is macroeconomics? Why do we care? (c) The big picture 2. Course logistics 3. Measuring Aggregate Production 2 World Production (1996) Long-term Growth Facts • Facts: Between 1870 and 2000: – US production of goods and services (Gross Domestic Product): increased by factor of 100 – Real GDP per capita: increased by factor of 13 • Real GDP per capita – Basic measure of standard of living 3 Increasing Real GDP per Capita and Inequality Source: Johnston and Williamson (2003), Helpman (2003), Penn World Table 6.1 Argentina Australia Brazil Canada China Mexico US U.K Germany India Japan Nigeria $0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 1860 1880 1900 1920 1940 1960 1980 2000 2020 Real GDP per capita Per capita GDP rankings: 1870 to 2001 Small Differences in Growth Rates Can Make Huge Differences over Time! Country rank GDP rank GDP Annual growth 2001 as in per capita in per capita in rate (%) a multiple 2001 in 2001 1870 1870 ($2001) 1870-2001 of 1870 Australia 19 25780 1 5,254 1.2 4.9 United Kingdom 26 24460 2 3,318 1.5 7.4 Belgium 9 28210 3 3,108 1.7 9.1 Switzerland 5 31320 4 3,056 1.8 10.2 Netherlands 16 26440 5 3,018 1.7 8.8 United States 3 34870 6 2,837 1.9 12.3 New Zealand 39 19130 7 2,682 1.5 7.1 Denmark 10 27950 8 2,414 1.9 11.6 Canada 11 27870 9 2,408 1.9 11.6 France 21 25280 10 2,315 1.8 10.9 Argentina 60 11690 11 2,083 1.3 5.6 Austria 14 27080 12 2,053 2.0 13.2 Italy 27 24340 13 2,039 1.9 11.9 Germany 15 1,998 Spain 35 20150 16 1,990 1.8 10.1 Japan 13 27430 23 897 2.6 30.6 25530 2.0 12.6 20 Consequences of long-run growth: US and China • Today the relative size of China’s GNI relative to US: 17% – In per capita terms: 4% • Current growth rates: – GNI annual growth rate: 9 . 6% in China, 3 . 5% in US – GNI In per capita growth rate: 9% in China, 2 . 5% in US 4 • At current growth rates: – GNI are equalized in 30 years – GNI percapita equalized in 52 years • Can China maintain this extraordinary growth? • What are the sources of long-run growth? 5 Trend vs. Business Cycle: What Causes Business Cycle? Real GDP 2000 3000 4000 5000 6000 7000 8000 9000 10000 11000 12000 596163656769717375777981838587899193959799010305 Billions of Chained 2000$ Recession 74-75 Recession 82 Recession 80 Recession 2001 Recession 90-91 Recession 69-70 Recession 60 Business Cycle Civilian Unemployment Rate (SA) 2 4 6 8 10 12 59 61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 Date Percent 2 4 6 8 10 12 What is the role of monetary policy • Wall Street to Fed: Cut rates now! (CNN, Jan 15) • “The market now think it is a lock the Fed will cut its key federal funds rate by at least half a percentage point, to 3 . 75% by the end of the month...” – What is the funds rate?...
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Lecture1_2010_M - Intermediate Macroeconomics W3213 Prof...

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