HOOct11 - Economics 201, Witte, Tuesday, October 11, 2005...

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Economics 201, Witte, Tuesday, October 11, 2005 Exam Tuesday of next week, similar to old exams. Bring a calculator. It will cover everything since the first day. Also, Krugman & Wells 1-8, Buchholz I-IV, VI-VIII, XI (p. 247-263). We will announce some extra office hours via e-mail and on Blackboard. Old exams can be found here: http://www.faculty.econ.northwestern.edu/faculty/witte/B01/exams/ Quiz this week Aplia Chapter 6 PS II, TA section: Draw AS-AD diagram and shift of one curve. Office hours (Mark Witte in Andersen 311, TAs in Andersen 328). Mark W. Tuesday, 2:00-4:00 and Wednesday 9:30-11:30, Mark S., Monday, 10-noon, Tim Thursday, 4:30-6:30, Nenad Wednesday, 1:30-3:30, Jeff Thursday, 10-noon, in Andersen 328. Malthus versus Ricardo I. Growth: Population Growth versus Food Production Growth a. Aggregate Demand Growing Faster than Aggregate Supply – Shortages b. Technology II. Business Cycles: Oversaving and “General Gluts?” a. Malthus: Saving reduces spending below production, resulting in gluts, unemployment. The macroeconomy is flawed and tends toward problems. b. Say’s Law: “Supply creates its own demand”, producing stuff, creates income, which creates demand. c. Ricardo: If we are in an equilibrium at some point where we are in a macroeconomic equilibrium (total production = total sales), why wouldn’t we stay in equilibrium, unless some outside factor changes to mess things up (war, financial panic, disaster) d. Malthus: But then why do we see so many times of low demand and high unemployment? I. Beginning Macroeconomics: Aggregation of markets to the entire economy II. The macroeconomy is all the markets in a nation, related group of nations, or the world, considered together. III. Analogies to microeconomics and supply and demand a. Quantity: Gross Domestic Product
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b. Price: The Price Level or Price Index, the average price of goods in the economy c. Aggregate Demand: Economy’s spending on new production d. Aggregate Supply: Economy’s creation of output and thus income. Price Level or Price Index I. Aggregated prices are measured by the price level (or equivalently, a price index). The actual level of prices is not particularly important, but its rate of change (inflation) is. II. Two prominent measures of inflation are the a. “Consumer Price Index” (CPI, also known as the “Cost of Living Index”). The CPI measures costs to consumers (often broken down by region and type of consumer). b. GDP Deflator which concerns prices across all sectors of the economy. Gross Domestic Product (GDP) I. Aggregate quantity is Gross Domestic Product (GDP = production of final goods in a given period of time in a given region) a. Nominal GDP is current production valued at current prices b. Real GDP is used for comparing growth in output over time and adjust changes in nominal GDP for changes in the price level. II.
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This note was uploaded on 01/14/2012 for the course ECON 201 taught by Professor Witte during the Spring '08 term at Northwestern.

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HOOct11 - Economics 201, Witte, Tuesday, October 11, 2005...

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