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Macroeconomics The Big Picture • Modern Macro is “new.” • Before 1930s, the economy was thought to be primarily self-regulating (thought that markets would ‘clear’ by themselves). • Production and Unemployment in the Great Depression changed that view. • Production was extremely low. Employment was extremely low. • John Maynard Keynes argues a depressed economy is the result of inadequate spending and ‘sticky’ prices. • Keynes also argues the government could help out – if C falls, G could rise to temporarily take its place. Government Policies • Fiscal Policy – Spending and Taxes • Monetary Policy – Changes in the money supply The Business Cycle The Business Cycle Business Cycle • 3 Key Economic Indicators – Production (GDP) – Employment (The Unemployment Rate) – Inflation (CPI, PPI, GDP Deflator) The Business Cycle • The National Bureau of Economic Research determines when recessions begin and end. • Up to date data can be found here: – http://www.nber.org/cycles/cyclesmain.html The Business Cycle & Employment Comparing Recessions Comparing Recessions Comparing Recessions Current vs. Great Depression Economic Growth Economic Growth Economic Growth • Economic Growth is a relatively new concept. Only recently did countries see what we think of as “growth.” • Are you richer than the “richest man ever” ? Net worth estimated up to $663 Billion in today’s dollars (adjusting for inflation)