Short Run Macro Model Notes

Short Run Macro Model Notes - Chapter 11 Notes October 20...

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Chapter 11 Notes - October 20: Initial claims for unemployment insurance - 403,000 in week of Oct. 15 - Four-week moving average: 403,000 Short-Run Macro Model: Procedure - Consider determinants of major components of spending- C, I, G, NX- individually - Note that total spending must equal total production - Determine “endogenous” level of spending and output - “Endogenous” means determined within the model Consumption Spending - Expenditures by households on newly produced goods and services - Consists of purchases of… - Durable goods - Nondurable goods - Services - Potential determinants of consumption spending: - Disposable income: income they have in current period **Disposable income is most important determinant of consumption spending - Wealth - Interest rates - Expectations of future employment, income Why is Stabilization of House Prices Important Now? - Help prevent a further erosion of household wealth, which is a negative factor for consumption - Reduce fear among potential homebuyers to try to “catch a falling knife”
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