assign15 - 1 Intro Macro N. Sheflin Assignment 15 the LAST...

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1 I n t r o M a c r o N . S h e f l i n Assignment 15 – the LAST one (for this semester) The End is Near LAST CLASS – Monday 5/2 – Extra Credit Due. HELP/INFORMATION FOR THE FINAL EXAM- see Sakai COURSE EVALUATIONS/SURVEYS/POSTTEST – Do University Sakai evaluation NOW (others after final, reminders will be sent) FINAL EXAM CONFLICTS SEE ME NOW with printed schedule FINAL EXAM H1 Friday May 6 8am 01 Wednesday May 11 noon NOTE – no multiple choice homework this week. NOTES Macroeconomic Issues and Controversies – Government Deficits, Stabilization, and the Financial Crisis/Great Recession of 2007-9, Evolution of Macroeconomics and Macroeconomic ‘Schools’ and controversies Also Investment Game Round 5 - derivatives. READING Samuelson Chapters 17 A, B, C and 17C and 16C (primarily discussion of credibility and policies to lower unemployment in the lr), And The Crisis of Credit Visualized on youtube And skim Blinder: “Is There a Core of Practical Macroeconomics That We Should All Believe?” ../Is ThereACoreofPracticalMacroeconomicsThatWeShouldAllBelieve .pdf Blinder KEY POINTS: Short-run 1. r nom set by Fed by Taylor rule (rather than Md&Ms) Fed eacts to Y, inflation 2. given r nom Æ I Æ D Æ Y (IS curve – equilib in product mkt ) Emphasis on housing and Consumer durables rather than I Prices ‘sticky’ i.e. P, w given (horiz agg S) 3. Okun’s law determines U
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2 4. Phillips curve determines inflation i.e. Infl=f(U) So, p,w given, Fed sets r Æ I,Cd Æ D Æ y Æ U Æ Inflation And maybe, for fun, Krugman, How Did Economists Get It So Wrong? Krugman KEY POINTS: Elegance rather than applicability Ignored behaviorial, psychological factors Assumption that financial markets efficient Assumption that individuals rational utility maximizers, etc Left Keynes Animal spirits, innately unstable, finance misleading A Citizens Guide - 2009 Financial Report of the United States . .. www. gao .gov/financial/fy2009/09 guide .pdf KEY POINTS SR Monetary and Fiscal Policy Fiscal government spending and tax multiplier concept o partial crowding out o automatic stabilizers accommodative monetary policy liquidity trap/ zero lower bound tight money policies / credit crunch monetary policy and o wealth effect o stock market o exchange rates and X and M LR Monetary Policy LR impact of Ms is P only o So Fed’s only LR focus should be on controlling inflation role of inflation expectations and Fed credibility rules versus discretion in monetary policy o constant money growth rule (Friedman) since MV=PY, with V constant/stable and wishing to hold P constant, M should grow at rate of growth of Y (real gdp) in long-run – i.e., not react to SR fluctuations
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assign15 - 1 Intro Macro N. Sheflin Assignment 15 the LAST...

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