20100929+six+lectures+on+depression+economics

20100929+six+lectures+on+depression+economics - J Bradford...

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Six Lectures on Depres- sion Economics Notes for the Fall 2010 Instantiation of Economics 1 at U.C. Berkeley Lecturer: J. Bradford DeLong MW 12-1, + 2 hours section/week Version 0.99 J. Bradford DeLong: Six Lectures on Depression Economics Version 0.99: 9/29/2010
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....................................... 1. The Place of Depression Economics 6 ............................................................................................ What You Will Learn 6 .................................................................................... What Is Macroeconomics? 6 The Parts of Macroeconomics Shifting the Focus to the Economy as a Whole The Importance of Expectations in Macroeconomics .............................................................................. Depression Economics Proper 9 ............ Depression Economics as the Most Important Part of Economics Now 11 ............................................................................................................. Summary 12 .......................................................................................... Test Your Knowledge 13 .............................................. 2. Measuring the Macroeconomy 14 .......................................................................................... What You Will Learn 14 ..................................................................... The Flow of Production and Sales 14 Production Sales How to Keep Track Imports and Exports NIPA Summary ........................................................................... Real and Nominal Magnitudes 17 ........................................................... The Circular Flow of Economic Activity 18 Say’s Law and the Circular Flow The Components of GDP ............................................................................................................. Summary 21 .......................................................................................... Test Your Knowledge 21 J. Bradford DeLong: Eight Lectures on Depression Economics Version 0.99: 9/24/2010 2
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..................... 3. The Circular Flow and Depression Economics 22 .......................................................................................... What You Will Learn 22 ............................................................................... The Circular Flow Principle 22 Say’s Law and the Circular Flow .............................................................................. Disrupting the Circular Flow 24 The Coming of the Great Recession Economists and the Possibility of a “General Glut” Does Excess Supply Here Mean Excess Demand There? Disrupting the Circular Flow .............................................................. A Caveat: Not a Consensus Framework 29 ............................................................................................................. Summary 31 .......................................................................................... Test Your Knowledge 32 .................................... 4. The Income-Expenditure Framework 33 .......................................................................................... What You Will Learn 33 ................................................................................. Understanding Downturns 33 Downward-Sticky Wages Consequences of Downward-Sticky Wages Suppose Wages Were Not Sticky? ......................... Analyzing The Components of National Income and Product 35 Components of Spending Consumption Spending .................................................................... Calculating the Size of Downturns 37 Expenditure, Output, and Income Where the Economy Settles: Equilibrium J. Bradford DeLong: Eight Lectures on Depression Economics Version 0.99: 9/24/2010 3
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How Well Does This Work? ............................................................................................................. Summary 41 .......................................................................................... Test Your Knowledge 41 ............................................................ 5. Economic Downturns 42 .......................................................................................... What You Will Learn 42 ..................................................................................................... Recapitulation 43 Our Framework for Depression Economics ............................................................ Macroeconomics and Financial Markets 44 Keynesians Monetarists Minskyites Who Is Right? .................................................................................... Calculating Output Gaps 50 Savings-Investment Gaps Money Demand-Money Supply Gaps Panic and Flight to High-Quality Assets ............................................................................................................. Summary 56 .......................................................................................... Test Your Knowledge 56 .......................................... 6. Dealing with the Great Recession 58 .......................................................................................... What You Will Learn 58 ..................................................................................................... Recapitulation 58 Keynesians Monetarists But This Time Is Different J. Bradford DeLong: Eight Lectures on Depression Economics Version 0.99: 9/24/2010 4
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.......................................................... The Third Type of Downturn: Minskyite 61 An Excess Demand for Safe Financial Assets Panic and Flight to High-Quality Assets ............................................................................................ The Minskyite Cure 63 A Shortage of Safe High-Quality Assets The Process of Recognition The Cure to the Downturn: “Lend Freely...” Risks of Aggressive Policy Activism The Minskyite Cure: “At a Penalty Rate...” ........................................................ How Has This Advice Been Implemented? 67 How are we doing? How has the U.S. government, and other governments, done at carrying out the proper policies for dealing with a Minskyite downturn?
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