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MacroEcon Lecture Chapter 10

MacroEcon Lecture Chapter 10 - Chapter 10 Cyclical...

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Chapter 10 Cyclical unemployment: Causes: recession (need it), depends on level of spending ( the only reason that causes the fluctuations in the economy) Aggregate expenditures: level of spending 4 kinds of spending consumption spending (C) Members of household: buy computers, houses, books etc Investment spending ( I ) What businesses engage in (machinery, wages, materials) Only businesess Government spending (G) Government purchases like buildings, bridges Net exports: (XN) Exports Commodity sold by US country For the US: most important component out of these 4: Consumer Spending Look at total amount of spending in US economy, consumption spending accounts for 2/3 for total spending Then it’s investment spending, government spending (15%) exports (almost nothing) 2 reasons why there was significant decline in consumption spending Housing market
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Takes about 1 year for the house to come on to sell Producers may not be able to make the right predictions (1 year in advance) for the demand of houses Oversupply houses: production will slow down and employment increases Housing market: accounts for a significant percentage of GDP Ripple effect 1920’s & 1990’s: amazing economic growth
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