Lecture1_June2

Lecture1_June2 - June 2, 2010 June 2, 2010 Intermediate...

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Unformatted text preview: June 2, 2010 June 2, 2010 Intermediate Macroeconomics 2 Current Events As a result of the mortgage crisis. the U.S. and many foreign economies have recently experienced deep recessions GDP declined substantially, many countries still in recession U.S. unemployment rate reached its peak at 10.1% in October, 2009 Still very high as of April 2010 (9. 5%) June 2, 2010 Intermediate Macroeconomics 3 Current Events June 2, 2010 Intermediate Macroeconomics 4 June 2, 2010 Intermediate Macroeconomics 4 Current Events Stock-market prices declined 40% in 2008 Stock-market prices have risen 45% since March 2/2/2009 200 400 600 800 1000 1200 1400 1600 1800 1/3/1950 1/3/1953 1/3/1956 1/3/1959 1/3/1962 1/3/1965 1/3/1968 1/3/1971 1/3/1974 1/3/1977 1/3/1980 1/3/1983 1/3/1986 1/3/1989 1/3/1992 1/3/1995 1/3/1998 1/3/2001 1/3/2004 1/3/2007 1/3/2010 S&P 500 Index June 2, 2010 Intermediate Macroeconomics 5 June 2, 2010 Intermediate Macroeconomics 5 June 2, 2010 Intermediate Macroeconomics 5 Current Events Federal Reserve has lowered interest rates to virtually zero percent Credit spreads at their highest levels ever June 2, 2010 Intermediate Macroeconomics 6 June 2, 2010 Intermediate Macroeconomics 6 June 2, 2010 Intermediate Macroeconomics 6 June 2, 2010 Intermediate Macroeconomics 6 Current Events Federal Reserve has lowered interest rates to virtually zero percent Credit spreads at their highest levels ever June 2, 2010 Intermediate Macroeconomics 7 June 2, 2010 Intermediate Macroeconomics 7 June 2, 2010 Intermediate Macroeconomics 7 June 2, 2010 Intermediate Macroeconomics 7 June 2, 2010 Intermediate Macroeconomics 7 Current Events Inflation level and wage rates declined substantially Is aggregate demand weak? Is aggregate supply weak? IS/LM framework is not sufficient for in-depth analysis June 2, 2010 Intermediate Macroeconomics 8 Theory GDP ? Price Level AS AD ? June 2, 2010 Intermediate Macroeconomics 9 Production Employment Wages Consumption Theory Contemporaneous (within the same period) AND Dynamic (across periods) interactions of variables MACROECONOMY PRIVATE SECTOR PUBLIC SECTOR (GOVERNMENT) CONSUMERS FIRMS Interact through three types of markets: 1. Goods markets 2. Labor markets 3. Capital/asset markets Interact through policy:...
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Lecture1_June2 - June 2, 2010 June 2, 2010 Intermediate...

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