Lecture 2-3 - Day 2 Macroeconomic Issues and Problems...

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Day 2 – Macroeconomic Issues and Problems Macroeconomics: examines economy as a whole. Where did macroeconomics come from? Important Dates – 1929: Stock Market Crash (Fell 91% between October 1929 and June 1932, Dow fell 31% overall in the last year) September 2008, stock prices fell to ½ peak values, similar to initial decline in 1929) Great Depression 1930-1932: 9000 U.S. Banks Fail 3 of 5 largest Investment Banks fail in 2008. 15 banks fail in 2008, 153 in 2009, 9 in 2010 (about 5 billion in deposits so far in 2010) ( www.FDIC.gov ) Mortgage Foreclosures and defaults at record levels today (3.4% default rate, 1/7 of homes have payments past due or are in foreclosure (14.4%), 1/10 th at beginning of year, highest level since 1972 when it was first measured) 1933: 25% U.S. Unemployment, World Depression. This is about 12.5 million people out of a labor force of about 50 million (estimate of labor force by NBER. Labor Force and Unemployment are not perfectly comparable, as the BLS didn’t measure until 1948) Official Unemployment today at 10%, alternative measures (U-6) put unemployment at 17.3%, highest since Great Depression but not as high There were 6.4 unemployed workers for each job opening. Last November Overall, GDP falls by 25% Decline today closer to 2% or less. 1933: Federal Deposit Insurance Corporation (Federal Reserve Bank, FED, since 1913) FDIC still a huge part of the solution today. 1935: Social Security In good shape today, surplus of trillions 1936: John Maynard Keynes, The General Theory of Unemployment 1940’s: WWII, Recovery of Economy. Unemployment down to 1.2% in 1944 1946: Employment Act “The Congress hereby declares that it is the continuing policy and responsibility of the Federal Government…to promote maximum employment, production and purchasing power” When Does Inflation enter the formula? 1972-1982 – high inflation (average 8.2%) three years (79-81) over 10%. Stagflation Unemployment averaged 6.9% 79-81.
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Depression versus recession Recession: 3 quarters of economic downturn ish. (NBER decides) This is the worst recession since the Great Depression: Paul Volker (Former FED Chairman) – “Great Recession” Art MacEwan (Umass Boston) – “Repression” brought about by economic policy of deregulation, pro-rich and anti-labor policy Some Big Differences Between this recession and others Women are now half of workforce, more likely to be breadwinners (3/4 of jobs lost in recession are men) yet women only make 78 cents for a man’s dollar (Heather Boushey) Consumer Debt is much higher than any, so people have less savings to start with and higher mortgages. Economic Growth:
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This note was uploaded on 10/19/2011 for the course ECON 104 taught by Professor Dolenc during the Spring '08 term at UMass (Amherst).

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Lecture 2-3 - Day 2 Macroeconomic Issues and Problems...

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