mankiw7e-chap09

mankiw7e-chap09 - Chapter 9 Introduction to Economic...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
Introduction to Economic Introduction to Economic Fluctuations Chapter 9 Chapter 9 In this chapter, you will learn: facts about the business cycle how the short run differs from the long run an introduction to aggregate demand an introduction to aggregate supply in the short run and long run how the model of aggregate demand and aggregate supply can be used to analyze the short-run and long-run effects of “shocks.” Facts about the business cycle GDP growth averages 3–3.5 percent per year over the long run with large fluctuations in the short run. Consumption and investment fluctuate with GDP, but consumption tends to be less volatile and investment more volatile than GDP. Unemployment rises during recessions and falls during expansions. Okun’s Law : the negative relationship between GDP and unemployment.
Background image of page 1

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

View Full DocumentRight Arrow Icon
Growth rates of real GDP, consumption Percent change from 4 quarters earlier Average growth rate Real GDP growth rate Consumption growth rate Growth rates of real GDP, consumption, investment Percent change from 4 quarters earlier Investment growth rate Real GDP growth rate Consumption growth rate Unemployment Percent of labor force
Background image of page 2
Okun’s Law Percentage change in real GDP Change in unemployment rate 3 2 Y u Y 1975 1982 1991 2001 1984 1951 1966 2003 1987 2008 1971 Index of Leading Economic Indicators Published monthly by the Conference Board. Aims to forecast changes in economic activity 6-9 months into the future. Used in planning by businesses and govt, despite not being a perfect predictor. Components of the LEI index Average workweek in manufacturing Initial weekly claims for unemployment insurance New orders for consumer goods and materials New orders, nondefense capital goods New building permits issued Index of stock prices M2 Money Supply Yield spread (10-year minus 3-month) on Treasuries Index of consumer expectations
Background image of page 3

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

View Full DocumentRight Arrow Icon
Index of Leading Economic Indicators Note: turns down prior to recession and up prior to the end of a recession Source: Conference Board 2004 = 100 Time horizons in macroeconomics Long run Prices are flexible, respond to changes in supply or demand.
Background image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 12/04/2011 for the course ECON 305 taught by Professor Terrell during the Spring '08 term at Maryland.

Page1 / 14

mankiw7e-chap09 - Chapter 9 Introduction to Economic...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online