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Assorted Chapter 1 & 2 Info

Assorted Chapter 1 & 2 Info. ECON 402 – Spring 2014. What is Macroeconomics?. Macroeconomics is the study of what is happening to the economy as a whole, the economy-in-the-large, the macroeconomy . What do Macroeconomists Do?. Macroeconomists’ principal tasks:

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Assorted Chapter 1 & 2 Info

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  1. Assorted Chapter 1 & 2 Info ECON 402 – Spring 2014

  2. What is Macroeconomics? • Macroeconomics is the study of what is happening to the economy as a whole, the economy-in-the-large, the macroeconomy.

  3. What do Macroeconomists Do? • Macroeconomists’ principal tasks: • To try to figure out why overall economic activity rises and falls: the value of production, total incomes, unemployment, inflation. • Intermediate variables like interest rates, stock market values, and exchange rates play a major role in determining the overall levels of production, income, employment, and prices.

  4. Why Macroeconomics Matters • Three reasons • Cultural literacy • Self-interest (understanding the situation you are in) • Civic responsibility – your duty to vote, and to understand whether who you are voting for is a lying scumbag can deliver what he or she promises.

  5. Stagnant Per Capita Income

  6. Key Concepts • Fallacy of Composition • Paradox of Thrift • Self-fulfilling prophecies, a.k.a. “sunspot” equilibria • Animal spirits

  7. Macroeconomic Policy • Growth policy: nothing matters more in the long run for the quality of life in an economy than its long run rate of economic growth. • “A rising tide lifts all boats.”

  8. U.S. Real GDP (Log scale)

  9. U.S. Real Disposable Income Per Capita

  10. Macroeconomic Policy (cont’d) • Stabilization policy: the second major branch of macro policy is the government’s stabilization policy. • Business cycles: periods in which production grows and unemployment falls are called booms, or macroeconomic expansions; periods in which production falls and unemployment rises are called recessions, or worse, depressions.

  11. Macroeconomic Policy (cont’d) • Today’s governments have powerful abilities to improve economic growth and to smooth out the business cycle by diminishing the depth of recessions and depressions. • Good macroeconomic policy can make almost everyone’s life better; bad macroeconomic policy can make almost everyone’s life worse.

  12. Declining Volatility Since Reserve Act of 1930

  13. So Reduced Volatility is Good, Right? • So what could possibly be wrong with ‘price stability’ and lower volatility in overall nominal output?  How could reducing the frequency and severity of recessions be a bad thing?

  14. Debt, debt everywhere...

  15. Bad Growth Policy…

  16. Even Worse Growth Policy?

  17. The True State of Unemployment

  18. This One’s Even Worse…

  19. Worse Still (Part 1)?

  20. Worse Still (Part 2)?

  21. Wait, what? • "But I want you all to know, I will not rest until anybody who's looking for a job can find one -- and I'm not talking about just any job, but good jobs that give every American decent wages and decent benefits and a fair shot at the American Dream.“ • President B.O., September 15, 2009 • http://www.whitehouse.gov/the-press-office/remarks-president-gm-lordstown-assembly-plant-employees-ohio-9152009

  22. Bonus Slide – The City vs Everyone Else

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