sumassign6 - Intro Macro ASSIGNMENT 6 N. Sheflin NOTES:...

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I n t r o M a c r o N . S h e f l i n ASSIGNMENT 6 NOTES: Price Indices, Inflation and the Short-Run Phillips Curve A quick look at Price Indices, Deflating nominal variables to get real variables and, more importantly, SR Inflation and the Short-Run Phillips Curve. This complete our first look at the SR Keynesian model of the economy. Next week we will turn to the LR Classical model and other issues, including economic growth. Investment Game Round 2 - more stock and investment strategies Quiz 3 Thursday 6/11 in class Advising 3 Careers And Jobs This Week. READING Mankiw chapters 6, 17 (skip the two “Shifts in the Phillips Curve” sections), “The Costs of Inflation” from chapter 12 (pages 259-265) Also, look at the CPI at: and maybe And DeLong’s Inflation page: and Phillips curve . WHERE WE ARE –outline of key points to date and why we did things in the order we have We started with an overview of economics and macroeconomics, turned to a quick review of basic economics and supply and demand. We then moved to macroeconomics with the short-run aggregate supply and demand model. We did SR first because we live in the short-run, are facing major short-run problems, and if we hadn’t started with the short-run, we would still have not yet mentioned recession, fiscal policy, etc. We then examined the measurement of GDP and other national income accounting ideas. Next we turned to money and the financial system, and then looked at fiscal and monetary policy in SR Keynesian framework. Now we are completing our first cut at SR macro, by looking at inflation in the short-run. SIMPLE KEYNESIAN MODEL Issues and Answers – applicable in the short-run (1-3 years), and/or economy below full-employment; : what determines output, unemployment? Aggregate Supply and Demand what causes inflation? unemployment? Demand and/or Supply shifts/shocks what causes business cycles? Demand and/or Supply shifts/shocks what are the determinants of interest rates? what determines consumption? Disposable income, wealth , consumer sentiment what determines investment? Interest rates, expectations How does fiscal policy work? G ->D->y by multiplier and p; T ->(Y-T)->C->D->y by multiplier, p; possibility of crowding out How does monetary policy work? Ms->i->I->D->y,p How does money “matter’ (affect the economy) in the short-run? Ms->i->I->D->y,p How does the Fed matter? Open market operations -> fed funds rate -> other i->I etc Other important issues: crowding out, pushing on a string,, real and nominal gdp, definition of gdp, measuring gdp, the multiplier, the mpc, demand pull and cost push inflation, stagflation, definition of macroeconomics,, fed funds rate, discount rate, open market operations
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2 Product Market aggregate D = C+I+G+X-M increases in any of these shift aggregate D curve by a multiple
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This note was uploaded on 03/24/2011 for the course ECON 103 taught by Professor Lin during the Summer '08 term at Rutgers.

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sumassign6 - Intro Macro ASSIGNMENT 6 N. Sheflin NOTES:...

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