Lecture 27 - Macroeconomics2 - 1 FIN 501 Financial...

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Unformatted text preview: 1 FIN 501 Financial Economics Lecture 27: Macroeconomics II Professor Nolan Miller 2 Announcements Problem Set #8 is due December 7. Remember: I drop the lowest problems set. But, you are responsible for this material on the final. Office Hours this week Wednesday, 2 4. 3 Outline for today Measuring Inflation Production Growth Savings, Investment & Interest rates. The Monetary System Aggregate Supply & Aggregate Demand Economic Indicators 4 Circular Flow Diagram II Households Firms Payments for goods and services Financial System S a v in g Investment Foreign Countries Pmts for Imported Goods Pmts for Exported Goods Government GDP is here! GDP includes: Consumer spending But not spending on imports. Investment Government Purchases Payments for Exports GDP = C + I + G + X - M P m t s f o r G & S 5 GDP Grows Too Slowly to Fill Jobs Gap ( Gross domestic product, the broadest measure of the goods and services produced by the economy, rose at an inflation-adjusted annual rate of 2% in the third quarter, up from 1.7% in the second quarter , the government said Friday. Investment (I): Businesses increased investment in equipment andfor the first time in more than two yearsin buildings. Much of the third-quarter growth came from businesses building inventories, an unsustainable source of growth. Consumption (C): Consumer spending accelerated, marking its strongest growth since late 2006, though much of the added spending went for imports. Exports of goods and services grew at a 5% pace, but imports rose 17.4%. Residential construction plunged in the wake of the expiration of the home-buyer tax credit. Government Spending (G): State and local government spending contracted, as it has in six of the past eight quarters. 6 U.S. Third Quarter Second Gross Domes GDP estimates are constantly updated as new data come in. The second estimate for 2010 3 rd Quarter came out 23 Nov. 2010. Increased estimated GDP growth rate to 2.5% (from 2%). The increase in real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, nonresidential fixed investment, exports, and federal government spending that were partly offset by a negative contribution from residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased. Third estimate of third quarter GDP comes out 22 Dec. 2010. 7 7 Real & Nominal GDP: Measuring Inflation 8...
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This note was uploaded on 06/05/2011 for the course FIN 580 taught by Professor Staff during the Spring '08 term at University of Illinois, Urbana Champaign.

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Lecture 27 - Macroeconomics2 - 1 FIN 501 Financial...

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