AGGD_SCLASS - 1 SR Keynesian Macro –Aggregate Demand and...

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Unformatted text preview: 1 SR Keynesian Macro –Aggregate Demand and Supply ¡ The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to 1 be quite exempt from any intellectual influence, are usually the slaves of some defunct economist . Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. ¡ “In the long-run we are all dead” ( depressionunemp / keynes singalong) invgame0, advise 1, macro history 23/47 What’s Doing in the News? “It is amazing how many reasons can be found to justify (unemployment): fear of inflation, balance of payments deficits, unbalanced budgets, excessive national debt, … James Tobin, Yale, ca 1960? 2 Course Issues ¡ How/when to do assignments/hw ¡ support/register NetID, serial number ¢ Smith not 123006789 and not [email protected] ¢ Can’t read serial number? ¡ Support/find your id E ffi 202 N J H ll ¡ Econ office 202 New Jersey Hall ¡ Learning Resource Centers – bring sheet wi questions, have it signed, show me after class, get password, sign online form ¡ Excused Absence – see me after class for password ¡ ODE link on course home page ¡ Inv Game – now round 0 3 2 Output and Prices in SR (Keynesian) ¡ Aggregate D&S ¢ Versus Micro D&S – different reasons, same ‘look’ ¡ Agg D=C+I+G+NX ¢ C=f(Y-T,Wealth, animal spirits) ¡ Y-T disposable income ¢ I=f(I,animal spirits) 4 ¢ G,NX exogenous for now ¡ Agg D downward sloping-complicated P ↓→ M/P ↑→ r ↓→ I ↑ → D ↑→ (p,y) ↑ ¡ Aggregate S curve Qs=f(P) cet. par. Upward sloping ¡ Reflects wages , costs, technology ¡ P up -> profit up and Qs up What Shifts Aggregate Demand Curve? ¡ D = C, I, G, NX (=X-M) ¢ Anything that changes components ¡ C=f(Y-T,W,Animal Spirits) ¢ Disposable income ¢ Wealth effect – stock mkt, housing, real assets ¡ I=f(r, expectations) 5 ¢ note r=i=interest rate ¡ Purchase of physical capital – plant &equip ¡ animal spirits ¡ r up, I down (I=investment in plant&equip)...
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This note was uploaded on 10/09/2011 for the course ECON 103 taught by Professor Lin during the Spring '08 term at Rutgers.

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AGGD_SCLASS - 1 SR Keynesian Macro –Aggregate Demand and...

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