SRKEYNESIANCLASS - Business Cycles Fiscal Policy and the...

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1 Business Cycles, Fiscal Policy and the Short-Run Keynesian Model ± Business Cycles ± The Keynesian SR Model ² Aggregate Demand versus Expenditure ± 45 degree line idea 1 ² algebra ² Consumption, Saving, Investment ± Fiscal Policy ² Agg D & multipliers ² Lags ² Policy rap/ fear boom and bust? 39 slides In the News? 2 Designed by Foster & Partners, a firm known for feats of technological wizardry, the city, called Masdar, would be a perfect square, nearly a mile on each side, raised on a 23-foot-high base to capture desert breezes. Beneath its labyrinth of pedestrian streets, a fleet of driverless electric cars would navigate silently through dimly lit tunnels. The project conjured both a walled medieval fortress and an upgraded version of the Magic Kingdom’s Tomorrowland. Course Issues ² Gradebook/ P-NP ² Clicker update / prize ² Chat Rooms – use them ² ODE ² Clicker reg – NOT YET or STUDENT # 3 ² Investment Game ² Resume ² Oct 1 Grad School ² Con Func Coming ² Religious holidays
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2 About Business Cycles ± Economic Fluctuations rather than cycles – irregular, not periodic ± 10 in post WWII NBER ² Average contraction 10 mos, expansion 57 mos ± Chronology: ² stock prices and other leading indicators 6-12 mos ² Decline in investment and aggregate demand ² Increase in inventories (unintended) ² Decline in gdp 4 ² Decline in employment, prices, interest rates, profits, but generally not wages Causes? ± Keynesian – Demand shocks – Investment related ² Propagated By Internal Dynamics – multiplier accelerator model ± Shocks? ² Inappropriate monetary policy ² Financial Crises ² Supply-side/Technological ± Exogenous causes versus endogenous dynamics 5 (multiplier accelerator) ± Discredited Business Cycle Theories Economic Waves ² Kitchin inventory 3–5 years ² Juglar fixed investment7–11 years ² Kuznets infrastructural investment 15–25 years ² Kondratiev wave 45–60 years ± 1946, Arthur F. Burns and Wesley C. Mitchell
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SRKEYNESIANCLASS - Business Cycles Fiscal Policy and the...

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