Chapter 6 ECONOMIC GROWTH. Usual measure. Economic Growth. In this chapter-
|
|
- Sheena Spencer
- 5 years ago
- Views:
Transcription
1 Chapter 6 ECONOMIC GROWTH In this chapter- Define and calculate the growth rate and explain the implications of sustained growth in economic activity Briefly describe the economic growth trends in the United States and other countries Explain what makes potential GDP grow Explain the sources of labor productivity growth Economic Growth Usual measure growth in real GDP per person (per capita) also called real income per capita. Real GDP Real GDP per capita = Population While growth indicates a rising living standard, its not a perfect measure of quality of life and living standard. want to consider items such as education, environment, health, leisure time distribution of income 3 1
2 High Quality of Life in Wealthy Countries Goes Beyond GDP 4 Growth Rate Growth rate is a percent change: Real GDP current year real GDP previous year x100 Real GDP previous year 51,549 51,110 For 2016: x100 = 0.85% 51,110 Small differences in GDP growth rate matter a lot over time The rule of 70 if a variable is growing by X percent per year it will double in approximately 70 / X years 70/2 = 35 years: 2% growth per year doubles in 35 years 70/4 = 17.5 years: 4% growth per year doubles in 17.5years 5 Importance of Economic Growth US real GDP per capita is currently $56,500 (2012 as the base year) Is been growing at 1.3% annual growth since At this rate, per capita real GDP will grow to $73,150 in 20 years. 56,500(1.013) 20 = $73,150 At 2% annual growth, this will grow to $56,500(1.02) 20 =$84,000 in 20 years Growth rate matters! 6 2
3 Growth Applies to Investment Returns? Suppose you have $5,000 to invest At 2% annual growth in a savings account this will grow to $5,000(1.02) 20 =$7,430 in 20 years. Grows to $10,950 at 4%. At 7%, in the stock market, $5,000(1.07) 20 =$19,350 in 20 years Growth rate matters! 7 The Basics of Economic Growth Economic Growth Versus Business Cycle Expansion Real GDP can increase for two distinct reasons: 1. The economy might be returning to full employment in an expansion phase of the business cycle. 2. Potential GDP might be increasing. The expansion of potential GDP is economic growth. The return to full employment in an expansion phase of the business cycle isn t economic growth. The Business Cycle +4% +3% peak -2% trough Long-run economic growth is in this example is 3%. In the expansion phase of the cycle, the growth rate is > the trend. 3
4 Long-Term Growth Trends Long-Term Growth Trends What Determines Potential GDP? Potential GDP is the level of real GDP produced when the labor is at fullemployment. To determine potential GDP we use a model with two components: An aggregate production function An aggregate labor market Potential GDP is supply/production driven. 4
5 What Determines Potential GDP Aggregate Production Function The aggregate production function tells us how real GDP changes as the quantity of labor changes when all other influences on production remain the same. An increase in the quantity of labor increases real GDP. Labor is measured as billions of hours worked per year. What Determines Potential GDP The Labor Market The demand for labor shows the quantity of labor demanded and the real wage rate. The real wage rate is the money wage rate divided by the price level. It s the purchasing power of the money wage. The supply of labor shows the quantity of labor supplied and the real wage rate. The labor market is in equilibrium at the real wage rate at which the quantity of labor demanded equals the quantity of labor supplied. What Determines Potential GDP Figure illustrates labor market equilibrium. Labor market equilibrium occurs at a real wage rate of $35 an hour and 200 billion hours employed. At a real wage rate above $35 an hour, there is a surplus of labor and the real wage rate falls. 5
6 What Determines Potential GDP At a real wage rate below $35 an hour, there is a shortage of labor and the real wage rate rises. At the labor market equilibrium, the economy is at full employment. What Determines Potential GDP Potential GDP The quantity of real GDP produced when the economy is at full employment is potential GDP. In this example, the economy is at fullemployment with 200 billion hours of labor employed and potential GDP is $13 trillion. Two forces drive growth in potential real GDP: Growth in the supply of labor Growth in labor productivity Note the change to growth 6
7 Growth in the Supply of Labor (measured as total hours worked) The total number of hours worked change as a result of changes in: 1. Average hours per worker 2. Employment-to-population ratio 3. Population growth (1) (2) (3) Total Hours Total Employment Total Hours = x x Population Total Employment Population The Effects of Population Growth An increase in population increases the supply of labor. With no change in the demand for labor, the equilibrium real wage rate falls and the aggregate hours increase. The increase in the aggregate hours increases potential GDP. Effect of Population Growth The labor supply curve shifts rightward. The real wage rate falls. Aggregate hours increase. 7
8 Effect of Population Growth Now we go to the production function. The increase in aggregate hours increases potential GDP. Because of the diminishing returns, the increased population increases real GDP, but decreases real GDP per hour of labor - (16/300 < 13/200) Growth of Labor Productivity Population growth increases aggregate hours and real GDP, but to increase real GDP per person, labor must become more productive. Labor productivity is the quantity of real GDP produced by an hour of labor (13/200 in our example, $65 per hour) If labor becomes more productive, firms are willing to pay more for a given number of hours so the demand for labor increases. Figure shows the effect of an increase in labor productivity. The increase in labor productivity shifts the production function upward. Workers produce 18/200, $90 per hour worked. 8
9 Growth in Labor Productivity In the labor market: An increase in labor productivity increases the demand for labor. With no change in the supply of labor, the real wage rate rises and aggregate hours increase. And with the increase in aggregate hours, potential GDP increases. Why Labor Productivity Grows The growth of labor productivity depends on: Physical Capital Growth Investment in new capital (more plant and equipment) increases capital per worker and increases labor productivity. Human Capital Growth Human capital acquired through education, on-the-job training, and learning-by-doing is the most fundamental source of labor productivity growth. Technological Advances Technological change - the discovery and the application of new technologies and new goods is a major driver increasing labor productivity. 9
10 Congressional Budget Office Projection Growth in Potential Real GDP April 2018 Projected Average Average Annual Growth Annual Growth Total, Total, Overall Economy Real Potential GDP Potential Labor Force Potential Labor Force Productivity a SKIP Growth Theories three growth theories: Classical growth theory, Neoclassical growth theory, New growth theory 10
Chapter 6 ECONOMIC GROWTH. World Economic Growth. In this chapter-
Chapter 6 ECONOMIC GROWTH In this chapter- Define and calculate the growth rate and explain the implications of sustained growth in economic activity Briefly describe the economic growth trends in the
More informationThe Basics of Economic Growth. Real GDP per person in Canada tripled in the 50 years between 1958 and 2008.
Real GDP per person in Canada tripled in the 50 years between 1958 and 2008. What has brought about this growth in production, incomes, and living standards? We see even greater economic growth in modern
More informationChapter8 3/9/2018. MONEY, THE PRICE LEVEL, AND INFLATION Part 2. The Money Market the Demand for Money
Chapter8 MONEY, THE PRICE LEVEL, AND INFLATION Part 2 the Demand for Money How much money do people and business firms want to hold? Depends on four main factors: The price level (P) Real GDP (Y), The
More informationMacroeconomics (Code: E214) - Lecturer: Dr. Amira Akl Ahmed. Faculty of Commerce Department of Economics English Section Academic year 2013/2014
Faculty of Commerce Department of Economics English Section Academic year 2013/2014 Questions for Chapter 6 of Macroeconomics, 10e (Parkin) First: Multiple choice questions The Basics of Economic Growth
More information10 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Chapt er. Key Concepts. Aggregate Supply1
Chapt er 10 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Aggregate Supply1 Key Concepts The aggregate supply/aggregate demand model is used to determine how real GDP and the price level are determined and why
More informationDokuz Eylül University Faculty of Business Department of Economics
Dokuz Eylül University Faculty of Business Department of Economics ECN 1002 PROBLEM SET III Q1) A link between the money market and the goods and services market exists through the impact of A) tax revenue
More informationObjectives THE ECONOMY AT FULL EMPLOYMENT: THE CLASSICAL MODEL
THE ECONOMY AT 8 FULL EMPLOYMENT: CHAPTER THE CLASSICAL MODEL Objectives After studying this chapter, you will able to Describe the relationship between the quantity of labor employed and real GDP Explain
More informationEconomic Growth C H A P T E R C H E C K L I S T. When you have completed your study of this chapter, you will be able to
Economic Growth CHAPTER25 C H A P T E R C H E C K L I S T When you have completed your study of this chapter, you will be able to 1 Define and calculate the economic growth rate, and explain the implications
More informationECO 2013: Macroeconomics Valencia Community College
ECO 2013: Macroeconomics Valencia Community College Exam 3 Fall 2008 1. The most important determinant of consumer spending is: A. the level of household debt. B. consumer expectations. C. the stock of
More informationA decrease in the price level makes consumers feel more wealthy, which in turn encourages them to spend more.
The aggregate-demand curve: Why the aggregate-demand curve is downward slopping: The price level and consumption: The wealth effect The price level and investment: The interest-rate effect The price level
More informationKarl Marx and Market Failure
Unit 3 Karl Marx and Market Failure Krugman Module 74 pp. 723-726; Module 76 pp. 743-750; Module 77 pp.754-756; Module 78 pp. 761-770; Module 79 pp. 782-785 Modules 17-19 pp. 172 198 1 Greed is Good. -The
More informationChapter 8. Economic Growth and Rising Living Standards
Chapter 8 Economic Growth and Rising Living Standards 1 Economic Growth and Rising Living Standards How do we explain the fact that living standards in many less developed countries are low? Living standards
More informationInstructions and Rules:
Name: Honor Pledge Signature: Section: Due Date: 5 pm on Monday, 11/23 (Place inside box outside my office door) Instructions and Rules: This is a timed (1 hour no breaks), closed book, takehome exam.
More informationMultiple Choice Questions (3 points each) Please answer the questions on the green scantron.
ECON 203-200, Fall 2006 EXAM #2 Multiple Choice Questions (3 points each) Please answer the questions on the green scantron. 1) If the short run aggregate supply curve is vertical, a decrease in money
More informationMIDTERM EXAMINATION #2 Instructions: To insure fairness in grading, please write only your student ID number on the top of each page of your exam.
Principles of Macroeconomics University of Alaska, Anchorage Lance Howe ID #: November 8, 003 MIDTERM EXAMINATION # Instructions: To insure fairness in grading, please write only your student ID number
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Suppose government has a budget deficit of $500 billion. If there is no Ricardo-Barro
More informationObjectives AGGREGATE DEMAND AND AGGREGATE SUPPLY
AGGREGATE DEMAND 7 AND CHAPTER AGGREGATE SUPPLY Objectives After studying this chapter, you will able to Explain what determines aggregate supply Explain what determines aggregate demand Explain macroeconomic
More informationTest Review. Question 1. Answer 1. Question 2. Answer 2. Question 3. Econ 719 Test Review Test 1 Chapters 1,2,8,3,4,7,9. Nominal GDP.
Question 1 Test Review Econ 719 Test Review Test 1 Chapters 1,2,8,3,4,7,9 All of the following variables have trended upwards over the last 40 years: Real GDP The price level The rate of inflation The
More informationBEFORE YOU BEGIN Looking at the Chapter
Name Date Period MEASURING ECONOMIC PERFORMANCE Chapter 12 BEFORE YOU BEGIN Looking at the Chapter Fill in the blank spaces with the missing words. GDP is the total value of all goods and services produced
More information7) What is the money demand function when the utility of money for the representative household is M M
1) The savings curve is upward sloping, because (a) high interest rates increase the future returns that households obtain from their savings. (b) high interest rates increase the opportunity cost of consuming
More informationFinal Exam - Economics 101 (Fall 2009) You will have 120 minutes to complete this exam. There are 105 points and 7 pages
Name Student ID Section day and time Final Exam - Economics 101 (Fall 2009) You will have 120 minutes to complete this exam. There are 105 points and 7 pages Multiple Choice: (20 points total, 2 points
More informationIntroduction to Economic Fluctuations
Chapter 9 Introduction to Economic Fluctuations slide 0 In this chapter, you will learn facts about the business cycle how the short run differs from the long run an introduction to aggregate demand an
More information7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Chapter. Key Concepts
Chapter 7 AGGREGATE SUPPLY AND AGGREGATE DEMAND* Key Concepts Aggregate Supply The aggregate production function shows that the quantity of real GDP (Y ) supplied depends on the quantity of labor (L ),
More informationINFLATION, JOBS, AND THE BUSINESS CYCLE*
Chapt er 12 INFLATION, JOBS, AND THE BUSINESS CYCLE* Key Concepts Inflation Cycles1 In the long run inflation occurs because the quantity of money grows faster than potential GDP. Inflation can start as
More informationFISCAL POLICY. Objectives. Government Budgets. Balancing Acts on Parliament Hill. Government Budgets. Government Budgets CHAPTER
FISCAL POLICY 24 CHAPTER Objectives After studying this chapter, you will able to Describe how federal and provincial budgets are created Describe the recent history of federal and provincial expenditures,
More informationReview. Question 1. Answer 1. Question 2. Answer 2. Question 3. Exam Review (Questions Beyond Test 1) True or False? True or False?
Question 1 Review Exam Review (Questions Beyond Test 1) An increase in income causes the IS curve to shift to the right. Answer 1 When income changes we move along the IS curve. Income itself is not an
More informationEconomics 1012A Introduction to Macroeconomics Fall 2008 Dr. R. E. Mueller Final Examination December 11, 2008
Economics 1012A Introduction to Macroeconomics Fall 2008 Dr. R. E. Mueller Final Examination December 11, 2008 Answer all of the following questions by selecting the most appropriate answer on your bubble
More informationPrinciples of Macroeconomics. Problem Set 1
Principles of Macroeconomics Problem Set 1 Sherif Khalifa 1. Consider the market for CD players: Price Supply 20 15 10 Demand 175 250 325 Quantity The equilibrium price= The equilibrium quantity= If the
More informationPrinciples of Macroeconomics. Problem Set 1
Principles of Macroeconomics Problem Set 1 Sherif Khalifa 1. Consider the market for CD players: Price Supply 20 15 10 Demand 175 250 325 Quantity The equilibrium price= The equilibrium quantity= If the
More informationMacro CH 29 sample questions
Class: Date: Macro CH 29 sample questions Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The relationship between real GDP and potential GDP over the
More informationKING S UNIVERSITY COLLEGE. Economics 1022B (570 & 574) Review Questions for Chapter 27
KING S UNIVERSITY COLLEGE Economics 1022B (570 & 574) G. Copplestone Review Questions for Chapter 27 Multiple Choice Questions: 1) If the marginal propensity to consume is 0.85, what change in consumption
More informationChapter 10 3/19/2018. AGGREGATE SUPPLY AND AGGREGATE DEMAND (Part 1) Objectives. Aggregate Supply
Chapter 10 AGGREGATE SUPPLY AND AGGREGATE DEMAND (Part 1) Objectives Explain what determines aggregate supply in the long run and in the short run Explain what determines aggregate demand Explain how real
More informationConsumer Choice and Demand
Consumer Choice and Demand CHAPTER12 C H A P T E R C H E C K L I S T When you have completed your study of this chapter, you will be able to 1 Calculate and graph a budget line that shows the limits to
More informationPutting the Economy Together
Putting the Economy Together Topic 6 1 Goals of Topic 6 Today we will lay down the first layer of analysis of an aggregate macro model. Derivation and study of the IS-LM Equilibrium. The Goods and the
More informationCome and join us at WebLyceum
Come and join us at WebLyceum For Past Papers, Quiz, Assignments, GDBs, Video Lectures etc Go to http://www.weblyceum.com and click Register In Case of any Problem Contact Administrators Rana Muhammad
More informationMacroeconomics and the Global Economic Environment (FNCE 613) SAMPLE EXAM 1
Macroeconomics and the Global Economic Environment (FNCE 613) SAMPLE EXAM 1 Macroeconomics and the Global Economic Environment (FNCE 613) SAMPLE EXAM 1 NAME (IN BLOCK LETTERS) Class time (CIRCLE ONE):
More informationCan we have low unemployment and low inflation? 2015 Pearson
Can we have low unemployment and low inflation? The Short-Run Policy Tradeoff 31 When you have completed your study of this chapter, you will be able to CHAPTER CHECKLIST 1 Describe the short-run policy
More informationECONOMIC GROWTH CHAPTER
ECONOMIC GROWTH 17 CHAPTER The Basics of Economic Growth U.S. real GDP per person and the standard of living tripled between 1960 and 2010. We see even more dramatic change in China, where incomes have
More informationChapter 7. SAVING, INVESTMENT and FINIANCE. Income not spent is saved. Where do those dollars go?
Chapter 7 SAVING, INVESTMENT and FINIANCE Income not spent is saved. Where do those dollars go? Describe financial markets. Explain how financial markets channel saving to investment. Explain how government
More informationECO401 Quiz # 5 February 15, 2010 Total questions: 15
ECO401 Quiz # 5 February 15, 2010 Total questions: 15 Question # 1 of 15 ( Start time: 09:37:50 PM ) Total Marks: 1 Economic activity moves from a trough into a period of until it reaches a and then into
More informationECNS Fall 2009 Practice Examination Opportunity
ECNS 202 -- Fall 2009 Practice Examination Opportunity Mark the answer on the provided scantron sheet using a #2 lead pencil. Erase completely. I am not responsible for poorly marked or poorly erased asnwers.
More informationdownload instant at
Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The aggregate supply curve 1) A) shows what each producer is willing and able to produce
More informationA BOND MARKET IS-LM SYNTHESIS OF INTEREST RATE DETERMINATION
A BOND MARKET IS-LM SYNTHESIS OF INTEREST RATE DETERMINATION By Greg Eubanks e-mail: dismalscience32@hotmail.com ABSTRACT: This article fills the gaps left by leading introductory macroeconomic textbooks
More informationECON 3312 Macroeconomics Exam 4 Crowder Fall 2016
ECON 3312 Macroeconomics Exam 4 Crowder Fall 2016 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) When the economy is hit by a temporary positive
More informationMidterm 2 - Economics 101 (Fall 2009) You will have 45 minutes to complete this exam. There are 5 pages and 63 points. Version A.
Name Student ID Section day and time Midterm 2 - Economics 101 (Fall 2009) You will have 45 minutes to complete this exam. There are 5 pages and 63 points. Version A. Multiple Choice: (16 points total,
More informationQuestions and Answers
Questions and Answers Ch 1 (continued) Q1: MCQ Aggregate Demand 1) The aggregate demand curve shows A) total expenditures at different levels of national income. B) the quantity of real GDP demanded at
More informationAggregate Demand and Aggregate Supply
Aggregate Demand and Aggregate Supply SLIDES PREPARED BY JUDITH SKUCE, GEORGIAN COLLEGE 1 In this chapter you will learn 8.1 What determines the shape of the aggregate demand curve and what factors shift
More informationIntroduction. Learning Objectives. Chapter 11. Classical and Keynesian Macro Analyses
Chapter 11 Classical and Keynesian Macro Analyses Introduction The same basic pattern has repeated four times in recent U.S. history: 1973-1974, 1979-1980, 1990, and 2001. First, world oil prices jump.
More informationAggregate Supply and Demand
Aggregate demand is the relationship between GDP and the price level. When only the price level changes, GDP changes and we move along the Aggregate Demand curve. The total amount of goods and services,
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
HW 3 - Macro MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) In the figure above, the SLF curve is the supply of loanable funds curve and the PSLF
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Final Exam Practice Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) In an economy with no government or foreign sector, it is always true
More informationEastern Mediterranean University Faculty of Business and Economics Department of Economics Spring Semester
Eastern Mediterranean University Faculty of Business and Economics Department of Economics 2015-16 Spring Semester Duration: 90 minutes ECON102 - Introduction to Economics II Final Exam Type A 2 June 2016
More informationShort-run and Long-run equilibria in the AD-AS model: Flexible Wages and Prices. 4Topic
Short-run and Long-run equilibria in the AD-AS model: Flexible Wages and Prices 4Topic The Classical View The term classical economics is often used to refer to an era in the history of economic thought
More information** Review ** For Test - 3
** Review ** For Test - 3 1. Gross domestic product or GDP is: A) the total dollar value intermediate goods and services produced in the economy in a given time period. B) the total dollar value of wages
More informationChapter 3. National Income: Where it Comes from and Where it Goes
ECONOMY IN THE LONG RUN Chapter 3 National Income: Where it Comes from and Where it Goes 1 QUESTIONS ABOUT THE SOURCES AND USES OF GDP Here we develop a static classical model of the macroeconomy: prices
More informationChapter 12 TAXES AND TAX POLICY Principles of Economics in Context (Goodwin et al.)
Chapter 12 TAXES AND TAX POLICY Principles of Economics in Context (Goodwin et al.) Chapter Summary This chapter starts out with a theory of taxes using the supply-and-demand model. Referring back to the
More informationCH 8. Name: Class: Date: Multiple Choice Identify the choice that best completes the statement or answers the question.
Class: Date: CH 8 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. Tax incidence is the a. burden buyers have to absorb from a tax on goods and services.
More informationMoney and the Economy CHAPTER
Money and the Economy 14 CHAPTER Money and the Price Level Classical economists believed that changes in the money supply affect the price level in the economy. Their position was based on the equation
More informationEcon 302 Fall Don t forget to download a copy of the Homework Cover Sheet. Mark the location where you handed in your work.
Econ 302 Fall 2005 Don t forget to download a copy of the Homework Cover Sheet. Mark the location where you handed in your work. Homework #1; Chapter 1. This homework has three parts (A, B, C). Each part
More informationExam #2 7 or 9 November Instructor: Brian Young. Formulas and Definitions. 5 points each
Economics 211 211 Macroeconomic Principles Exam 7 or 9 November 2011 Name: The value of this exam is 100 points. Instructor: Brian Young Please show your work where appropriate! Formulas and Definitions
More informationChapter 2 Determination of Interest Rates
Chapter 2 Determination of Interest Rates 1. According to the loanable funds theory, market interest rates are determined by the factors that control the supply of and demand for loanable funds. 2. The
More informationFinal Term Papers. Fall 2009 (Session 03b) ECO401. (Group is not responsible for any solved content) Subscribe to VU SMS Alert Service
Fall 2009 (Session 03b) (Group is not responsible for any solved content) Subscribe to VU SMS Alert Service To Join Simply send following detail to bilal.zaheem@gmail.com Full Name Master Program (MBA,
More informationProblem Set #2. Intermediate Macroeconomics 101 Due 20/8/12
Problem Set #2 Intermediate Macroeconomics 101 Due 20/8/12 Question 1. (Ch3. Q9) The paradox of saving revisited You should be able to complete this question without doing any algebra, although you may
More informationIn recessions the aggregate demand of economies falls. John Maynard Keynes
In recessions the aggregate demand of economies falls. John Maynard Keynes Disposable Income (YD) Autonomous Consumption + Consumption = $50 + 0.75YD Dependent Income- = Consumption Total Consumption A
More informationPractice Test 1: Multiple Choice
Practice Test 1: Multiple Choice 1. If aggregate planned expenditure exceeds real GDP A. actual inventories decrease below their target. B. firms are not maximizing their profits. C. planned consumption
More informationSAVING, INVESTMENT, AND THE FINANCIAL SYSTEM
13 SAVING, INVESTMENT, AND THE FINANCIAL SYSTEM LEARNING OBJECTIVES: By the end of this chapter, students should understand: some of the important financial institutions in the U.S. economy. how the financial
More informationUniversity of Toronto January 25, 2007 ECO 209Y MACROECONOMIC THEORY. Term Test #2 L0101 L0201 L0401 L5101 MW MW 1-2 MW 2-3 W 6-8
Department of Economics Prof. Gustavo Indart University of Toronto January 25, 2007 SOLUTION ECO 209Y MACROECONOMIC THEORY Term Test #2 LAST NAME FIRST NAME STUDENT NUMBER Circle your section of the course:
More informationSticky Wages and Prices: Aggregate Expenditure and the Multiplier. 5Topic
Sticky Wages and Prices: Aggregate Expenditure and the Multiplier 5Topic Questioning the Classical Position and the Self-Regulating Economy John Maynard Keynes, an English economist, changed how many economists
More informationThe answer lies in the role of the exchange rate, which is determined in the foreign exchange market.
In yesterday s lesson we saw that the market for loanable funds shows us how financial capital flows into or out of a nation s financial account. Goods and services also flow, but this flow is tracked
More informationECON 3010 Intermediate Macroeconomics. Chapter 3 National Income: Where It Comes From and Where It Goes
ECON 3010 Intermediate Macroeconomics Chapter 3 National Income: Where It Comes From and Where It Goes Outline of model A closed economy, market-clearing model Supply side factors of production determination
More information3. Suppose the following data represent the market demand for college education: a. If tuition is set at $5,000, how many students will enroll?
PS 4: 38 points Government Intervention: Chapter 9 problems 3. Suppose the following data represent the market demand for college education: a. If tuition is set at $5,000, how many students will enroll?
More informationThis paper is not to be removed from the Examination Halls UNIVERSITY OF LONDON
~~EC2065 ZB d0 This paper is not to be removed from the Examination Halls UNIVERSITY OF LONDON EC2065 ZB BSc degrees and Diplomas for Graduates in Economics, Management, Finance and the Social Sciences,
More informationChapter 8. The Importance of Growth. The Importance of Growth. Economic Growth and Rising Living Standards. Achieving higher growth rate in longrun
Economic Growth and Rising Living Standards Chapter 8 Economic Growth and Rising Living Standards How do we explain the fact that living standards in many less developed countries are low? Living standards
More informationMONEY. Economics Unit 4 Macroeconomics Just the Facts Handout
MONEY Economics Unit 4 Macroeconomics Just the Facts Handout Barter Economy A barter economy is an economy with no money. The only way you can get what you want in a barter economy is to trade something
More informationChapter 13. Aggregate Demand and Aggregate Supply
Chapter 13 Aggregate Demand and Aggregate Supply 1 Output and Price Level Figure 1 Two-Way Relationship Between Output and Price Level Aggregate Demand Curve Price Level Real GDP Aggregate Supply Curve
More informationAggregate Demand, Aggregate Supply, and the Self-Correcting Economy
Aggregate Demand, Aggregate Supply, and the Self-Correcting Economy The Role of Aggregate Demand & Supply Endogenizing the Price Level Inflation Deflation Price Stability The Aggregate Demand Curve Relates
More informationCHAPTER 3 National Income: Where It Comes From and Where It Goes
CHAPTER 3 National Income: Where It Comes From and Where It Goes A PowerPoint Tutorial To Accompany MACROECONOMICS, 7th. Edition N. Gregory Mankiw Tutorial written by: Mannig J. Simidian B.A. in Economics
More informationChapter 7. SAVING, INVESTMENT and FINIANCE. Income not spent is saved. Where do those dollars go?
Chapter 7 SAVING, INVESTMENT and FINIANCE Income not spent is saved. Where do those dollars go? Describe financial markets Explain how financial markets channel saving to investment Explain how governments
More informationPrinciple of Macroeconomics, Summer B Practice Exam
Principle of Macroeconomics, Summer B 2017 Practice Exam 1) If real GDP in a small country in 2015 is $8 billion and real GDP in the same country in 2016 is $8.3 billion, the growth rate of real GDP between
More informationCH 31 sample questions
Class: Date: CH 31 sample questions Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The federal budget is defined as a. a monthly statement of expenditure
More informationChapter 10 3/19/2018. Putting it Together. AGGREGATE SUPPLY AND AGGREGATE DEMAND (Part 2)
Chapter 10 GGREGTE SUPPLY ND GGREGTE DEMND (Part 2) Putting it Together Equilibrium is where D = S This figure shows SR equilibrium where D = SS (short-run aggregate supply) t a price level of 110, equilibrium
More informationMacro CH 24 sample test question
Class: Date: Macro CH 24 sample test question Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The funds firms use to buy and operate physical capital are
More informationLong Run vs. Short Run
Long Run vs. Short Run Long Run: A period long enough for nominal wages and other input prices to change in response to a change in the nation s price level. The Basic Model of Economic Fluctuations Two
More informationBPE_MAC1 Macroeconomics 1 Spring Semester 2011
Masaryk University - Brno Department of Economics Faculty of Economics and Administration BPE_MAC1 Macroeconomics 1 Spring Semester 2011 Midterm Exam - 08.04.2011, 10:30-11:30 Test B Guidelines and Rules:
More informationECON 313: MACROECONOMICS I W/C 19 th October 2015 THE KEYNESIAN SYSTEM IV Aggregate Demand and Supply Dr. Ebo Turkson
ECON 313: MACROECONOMICS I W/C 19 th October 2015 THE KEYNESIAN SYSTEM IV Aggregate Demand and Supply Dr. Ebo Turkson The Keynesian Aggregate Demand Schedule Relaxing the Assumption of Fixed General Price
More informationECON Drexel University Summer 2008 Assignment 2. Due date: July 29, 2008
ECON 202-001 Drexel University Summer 2008 Assignment 2 Due date: July 29, 2008 Instructor: Yuan Yuan Name This homework has up to 10 points bonus. Question 1 (40 points, 2 points each): MULTIPLE CHOICE.
More informationINTRODUCTION TO ECONOMIC GROWTH. Dongpeng Liu Department of Economics Nanjing University
INTRODUCTION TO ECONOMIC GROWTH Dongpeng Liu Department of Economics Nanjing University ROADMAP INCOME EXPENDITURE LIQUIDITY PREFERENCE IS CURVE LM CURVE SHORT-RUN IS-LM MODEL AGGREGATE DEMAND AGGREGATE
More informationBPE_MAC1 Macroeconomics 1 Spring Semester 2011
Masaryk University - Brno Department of Economics Faculty of Economics and Administration BPE_MAC1 Macroeconomics 1 Spring Semester 2011 Final Exam - 13.05.2011, 10:00-11:30 Test B Guidelines and Rules:
More informationGovernment Budget and Fiscal Policy CHAPTER
Government Budget and Fiscal Policy 11 CHAPTER The National Budget The national budget is the annual statement of the government s expenditures and tax revenues. Fiscal policy is the use of the national
More informationParkin/Bade, Economics: Canada in the Global Environment, 8e
Chapter 29 Fiscal Policy Decent chapter some stuff is easy, some stuff isn t. probably a good idea to review this one as well later 29.1 The Federal Budget 1) If revenues exceed outlays, the government's
More informationFebruary 03, Chapter 10 AD_AS_Business Cycle.notebook. Chapter 10: Economic Fluctuations Pages ,
Chapter 10: Economic Fluctuations Pages 261 284, 288 291 Aggregate Demand (AD) the relationship between general price level and total spending in the economy. Four components that make up total spending:
More informationAggregate Demand. Sherif Khalifa. Sherif Khalifa () Aggregate Demand 1 / 35
Sherif Khalifa Sherif Khalifa () Aggregate Demand 1 / 35 The ISLM model allows us to build the AD curve. IS stands for investment and saving. The IS curve represents what is happening in the market for
More informationEcon 102 Exam 2 Name ID Section Number
Econ 102 Exam 2 Name ID Section Number 1. Suppose investment spending increases by $50 billion and as a result the equilibrium income increases by $200 billion. The investment multiplier is: A) 10. B)
More informationHomework Assignment #6. Due Tuesday, 11/28/06. Multiple Choice Questions:
Homework Assignment #6. Due Tuesday, 11/28/06 Multiple Choice Questions: 1. When the inflation rate is expected to be zero, Steve plans to lend money if the interest rate is at least 4 percent a year and
More informationFaculty: Sunil Kumar
Objective of the Session To know about utility To know about indifference curve To know about consumer s surplus Choice and Utility Theory There is difference between preference and choice The consumers
More informationFinal Term Papers. Fall 2009 (Session 04) ECO401. (Group is not responsible for any solved content) Subscribe to VU SMS Alert Service
Fall 2009 (Session 04) ECO401 (Group is not responsible for any solved content) Subscribe to VU SMS Alert Service To Join Simply send following detail to bilal.zaheem@gmail.com Full Name Master Program
More informationAND INVESTMENT * Chapt er. Key Concepts
Chapt er 7 FINANCE, SAVING, AND INVESTMENT * Key Concepts Financial Institutions and Financial Markets Finance and money are different: Finance refers to raising the funds used for investment in physical
More informationEC202 Macroeconomics
EC202 Macroeconomics Koç University, Summer 2014 by Arhan Ertan Study Questions - 3 1. Suppose a government is able to permanently reduce its budget deficit. Use the Solow growth model of Chapter 9 to
More informationLong-Run Economic Growth
Economic Growth Long-Run Economic Growth A. It is the long-run upward trend in the economy. (i.e., growth in potential GDP) B. Small differences in growth rates have large long-run effects. 1. Ex. Suppose
More informationECON 3010 Intermediate Macroeconomics Chapter 10
ECON 3010 Intermediate Macroeconomics Chapter 10 Introduction to Economic Fluctuations Facts about the business cycle GDP growth averages 3 3.5 percent per year C (consumption) and I (Investment) fluctuate
More information