{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

325_Lecture11_Feb28

This preview shows pages 1–3. Sign up to view the full content.

1 S TEADY- S TATE (L ONG- R UN ) OF I NFINITE- P ERIOD E CONOMY: W HY ARE I NTEREST R ATES P OSITIVE? F EBRUARY 28, 2011 February 28, 2011 2 A L ONG- R UN T HEORY OF M ACRO Modern Macro Aggregate economic activity tends to “settle down eventually” The “ups and downs” are business cycles The “average” is the long-run Technical terminology: steady-state Business-cycle analysis after midterm exam time Actual GDP (or virtually any real economic series…) Long-run GDP aka steady-state GDP aka potential GDP

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
2 February 28, 2011 3 S TEADY S TATE Macro Fundamentals Steady state A concept from differential equations (Optimality conditions of economic models are differential equations…) Heuristic definition: in a dynamic (mathematical) system, a steady- state is a condition in which the variables that are moving over time settle down to constant values In dynamic macro models, a steady-state is a condition in which all real variables settle down to constant values But nominal variables (i.e., price level) may still be moving over time
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern