Macroeconomic Goals Notes - Lecture 4 Macroeconomic Goals...

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Lecture 4 Macroeconomic Goals - Nation’s macro goals set out in several pieces of legislation - Employment Act of 1946: high employment, stable prices - The Full Employment and Balanced Grown Act of 1978 (Humphrey-Hawkins Act): specific numerical goals for employment - Amendment to Federal Reserve Act- 1977. Requires Fed to conduct monetary policy so as to promote - maximum employment - stable prices - moderate long-term interest rates - these 3 goals not quantified in 1977 Act - moderate interest rates implied by stable prices - requirements of Fed Reserve Act often called “dual mandate” -low interest rates b/c inflation is low The Macroeconomic Approach - Aggregation - Do not attempt to model every market - information requirements cannot be met -instead, model each market Macro Schools of Thought -Classical economics -Keynesian ecnomics -Monetarist/ rule-based economics -Supply-side economics
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Recall: Positive econ vs. normative econ - Positive: scientific, objective - Normative: involves value judgements Key Macroeconomic Controversies - to what degree is economy self-stabilizing w/ acceptable equilibrium outcomes?
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