Ch.22_Short-Term Economic Fluctuations

Ch.22_Short-Term Economic Fluctuations - Part 7. The...

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1 Part 7. The Economy in the Short Run We will cover the following topics: Ch. 22 – Description of Short-Term Economic Fluctuations Ch. 23 – The Simple Keynesian Model of Fluctuations Ch. 24 – The Role of the Federal Reserve in Stabilizing the Economy Ch. 25 – Aggregate Demand and Aggregate Supply Ch. 26 – Macroeconomic Policy
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2 Ch. 22 Short-Term Economic Fluctuations Overview The sorts of things that we have studied so far were the essence of Macro before the Great Depression. Then the Great Depression hit. Economists tried to use their models to explain, but they couldn’t. The problem was their models applied to the long-run. 0 5 10 15 20 25 civilian unemployment rate 1900 1920 1940 1960 1980 2000 year Annual Unemployment Rate
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3 John Maynard Keynes “In the long run we are all dead.”
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4 I. Recessions and Expansions A recession (or contraction) is a period in which the economy is growing at a rate significantly below normal. A depression is an extremely severe or protracted recession. The duration of a recession is the length of time between the start and end of a recession. The
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Ch.22_Short-Term Economic Fluctuations - Part 7. The...

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