Lecture04 - Announcements Readings this week House ch 2-5 Mankiw ch 17 Shapiro and Slemrod Did the 2008 Tax Rebates Stimulate Spending Problem sets

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1 Announcements Readings this week • House, ch 2-5 • Mankiw, ch 17 • Shapiro and Slemrod, “Did the 2008 Tax Rebates Stimulate Spending?” Problem sets • PS #2 due now • PS #3 due next Tuesday in lecture Data Briefing: Aug 2010 CPI • August 2010 CPI released last Friday • CPI-U inflation, All items, Monthly rate – 0.3 percent, seasonally adjusted – 0.1 percent, not seasonally adjusted • CPU-U inflation, All items, Annual rate – 1.1 percent, August 2009 to August 2010 – 3.1 percent, July to August 2010, annual rate Annual rate calculation Month CPIU-Seasonally Adjusted July 2010 217.597 August 2010 218.150
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2 Annual rate calculation 218.150 monthly growth 217.597 1.00254 (1.00254 1) 100 0.3%  12 annual growth (1.00254) 1.0309 (1.0309 1) 100 3.1% Alternative measures of inflation CPI-U: All items • Increased 0.3% in August 2010 CPI-U: All items excluding food and energy • Increased 0.1% • “Core inflation” • Excludes volatile commodities Fed undershooting inflation target Inflation below Fed’s “comfort zone”
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3 Consumer choice over time Marginal rate of substitution ( MRS ) Budget constraint Changing prices (interest rate) Changing endowments (income) Marginal Rate of Substitution (MRS) The slope of an indifference curve. “Normal” indifference curves diminishing marginal rate of substitution .
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This note was uploaded on 12/31/2011 for the course ECON 402 taught by Professor House during the Fall '08 term at University of Michigan.

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Lecture04 - Announcements Readings this week House ch 2-5 Mankiw ch 17 Shapiro and Slemrod Did the 2008 Tax Rebates Stimulate Spending Problem sets

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