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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 Whats 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 Iclicker.com support/register NetID, serial number Smith not 123006789 and not firstname.lastname@example.org Cant read serial number? Iclicker.com 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 http://lrc.rutgers.edu/contact.shtml 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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- Spring '08