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slide_1 - Introduction and Preview Introduction to...

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Introduction and Preview January 18, 2012
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Introduction to macroeconomics ° The study of aggregate economic behavior - Macro: Aggregate price ( P ) and output ( Y ): eg. CPI and GDP - Micro: price and output of an individual good ( P apple , Y apple ) ° Dynamics (behavior of economic variables over time) - Short Run vs. Long Run
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Issues: - economic growth - business cycles - employment and unemployment - in°ation - macroeconomic policy - International trade and exchange rate
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Aggregate output: GDP in the post-war US 1950 1960 1970 1980 1990 2000 2010 2000 4000 6000 8000 10000 12000 14000 Real Output (GDP, 2005 Dollars) Natural Level of Real Output
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Long-run economic growth ° Why important: generally rising living standard ° US experience: stong trend of growth, interrupted by recessions ° Sources of growth: More inputs: population and labor force growth, increased capital More e¢ cient use of inputs: productivity growth ° Productivity growth is source of true growth in average living standards
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Percentage deviation of GDP from its natural level 1950 1960 1970 1980 1990 2000 2010 -10 -8 -6 -4 -2 0 2 4 6 (%)
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