Chapter+06+_Growth+and+Cycles_

Chapter+06+_Growth+and+Cycles_ - Chapter 6 Growth and...

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Chapter 6 Growth and Cycles
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Three Major Macroeconomic Variables & Issues 2 Aggregate Level of Output (Real GDP) General Price Level (GDP Deflator or CPI) Employment Economic Growth Inflation Unemployment
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Three Major Macroeconomic Issues 3 Definitions Costs Benefits Causes Policy Considerations
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Issue: Economic Growth Definition, Costs, Benefits Definition: Long-Term Increase in Real GDP Growth Rate = Real GDP 2008 − Real GDP 2007 Real GDP 2007 × 1±± Growth Rate = 1331².² − 13²54.1 13²54.1 × 1±± = ±.44%
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5 Benefits? Standards of Living Employment Costs? Economic Growth
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Trough Peak Time Real GDP Potential GDP GDP Gap = Potential GDP ─ Real GDP
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0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 1929 1939 1949 1959 1969 1979 1989 1999 2009 U.S. Annual Real GDP Source: Federal Reserve Bank of St. Louis, FRED Period Covered : 1929 to 2010
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0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 1952 1962 1972 1982 1992 2002 Real GDP Per Capita Source: Federal Reserve Bank of St. Louis, FRED Period Covered : 1929 to 2010
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9 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 1949 1955 1961 1967 1973 1979 1985 1991 1997 2003 2009 Actual Real GDP Potential Real GDP Source: Federal Reserve Bank of St. Louis, FRED Period Covered : 1949 Quarter 1 to 2011 Quarter 3
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0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 Actual Real GDP Potential Real GDP Source: Federal Reserve Bank of St. Louis, FRED Period Covered : 1949 Quarter 1 to 2011 Quarter 3 10 1974-75 Recession 1980-82 Recession 1990-91 Recession 2001 Recession 2008 Recession
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-4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 1949 1955 1961 1967 1973 1979 1985 1991 1997 2003 2009 Real Quarterly GDP Growth Rates Source: Federal Reserve Bank of St. Louis, FRED Period Covered : 1949 Quarter 1 to 2011 Quarter 3 11 Great Moderation
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Issue: Unemployment Definition, Costs, Benefits Unemployment Rate Fraction of those who want to work but don’t have a job
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Chapter+06+_Growth+and+Cycles_ - Chapter 6 Growth and...

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