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Unformatted text preview: I n t r o M a c r o N . S h e f l i n ASSIGNMENT 5 NOTES We look a bit deeper at the SR Agg Demand & Supply (D&S) model by exploring the consumption and savings functions, the multiplier, and fiscal policy in the SR. Note that we are leaving lots out of the chapters so follow my instructions on what to read quite carefully. You’ll also use econometrics to estimate a consumption function , and plot some economic variables Work on your resume . In addition to having one when the President offers you a position, it will show you if you are doing the right things in college ( see below ). More on advisement **CHANGE** Quiz 2 begins next Wednesday 2/18 6pm -Thurs 2/19 10pm. Covers assignment 3-4. READING follow my instructions carefully –we are skipping some material nad will come back to it later in the course. Parkin Chapter 12 (ONLY the sections mentioned below) and Chapter 14 (selected sections) Chapter 12 – IMPORTANT ignore ALL figures except 12.4. (you need to understand the words, not the graphical framework). You do NOT need to know about the 45 degree line or Aggregate Expenditure diagrams (think of aggregate expenditure as the same as aggregate demand). Read the following sections (in blue in the book) • “Fixed Prices and Expenditure Plans” • “The Multiplier” Skip “Real GDP with a Fixed Price Level” and the “Multiplier and the Price Level “ and the Mathematical Note Read pages 338-339 on Keynes and Business Cycles Chapter 14 Read the following sections (in blue in the book) • “The Federal Budget” • “Stabilizing the Business Cycle” • “Reading between the Lines – Fiscal Policy Today” Skip “The Supply Side: Employment nad Potential GDP” and the “The Supply Side: Investment Savings and Economic Growth “ and “Generational Effects of Fiscal Policy” Also A very brief note on fiscal policy at: http://www.udel.edu/htr/American/Texts/macro.html A succinct overview of budget and budget process. http://www.cbpp.org/3-7-03bud.htm Key Points and Summary read carefully before and after the homework Don’t worry about any of the graphical analysis in chapter 12, nor the ‘fixed price’ model. The key points to know are: • Ignore the ‘fixed-price’ discussions’. This was just a ‘simpler’ way to develop the SR Keynesian model, and will lead to confusion. • Note that there is INDUCED EXPENDITURE through consumption – that is Income/Output depends on consumption, but consumption depends on Income (induced consumption) : Y->C and C->D->Y....
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This note was uploaded on 02/29/2012 for the course 320 322 taught by Professor Macro-williams,micro-yoshi during the Fall '10 term at Rutgers.
- Fall '10