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Creating PowerPoint Lectures w/ Animation presented by Eric Chiang By Educators. For Students. Benefits of Animation: 1) Allows one to break down explanations, graphs, and models into steps 2) Replicates the viewing of the chalkboard in class 3) Allows students to review challenging concepts at home 4) Each slide serves as a template for the next CoreMacro Chapters 9 – 10 Aggregate Demand and Supply / Fiscal Policy 1. Promote Economic Growth 2. Maintain Full Employment 3. Achieve Price Stability Three Well Functioning Markets Capital Market (interest rates) Product Market (prices) Labor Market (wages) Economy stays on the long-run trend in the Classical Growth Model Economy experiences business cycles in modern macro models AD/AS model shows how aggregate output is affected by the price level AD/AS Model: Macro Equilibrium Price Level (P) LRAS SRAS Short-runmacro macroequilibrium equilibrium Long-run AD Output How does the AD/AS model explain the business cycle? Negative Demand Shock LRAS Price Level (P) Short-run Eq. SRAS Long-run macro equilibrium AD AD2 Output Gap Output Option 1: Letting the Market Correct Itself over Time LRAS Price Level (P) SRAS SRAS2 Short-run Eq. Long-run Eq. AD AD2 Output Gap Output Option 2: Using Expansionary Fiscal Policy to Shift AD LRAS Price Level (P) Short-run Eq. SRAS Long-run macro equilibrium AD AD2 Output Gap Output Positive Demand Shock: Leads to Demand-Pull Inflation Price Level (P) LRAS SRAS Short-run equilibrium Long-run macro equilibrium AD2 AD Output Gap Output Option 1: Letting the Market Correct Itself over Time Price Level (P) LRAS SRAS2 SRAS Short-run equilibrium AD2 AD Output Option 2: Using Contractionary Fiscal Policy to Reduce Inflation Price Level (P) LRAS SRAS Short-run equilibrium Long-run macro equilibrium AD2 AD Output Gap Output Negative Supply Shock: Leads to Cost-Push Inflation Price Level (P) Short-run equilibrium LRAS SRAS2 SRAS Long-run macro equilibrium AD Output Gap Output CoreMicro Chapters 8 – 9 Maximizing Profit in Competition and Monopoly: The 5 Step Approach In a perfectly competitive market… P 1. 2. 3. 4. 5. Find MR = MC Find optimal Q Find optimal P Find ATC Find Profit MC ATC $10 $7 0 P = MR Profit 20 Q In a monopoly or monopolistically competitive market… P 1. 2. 3. 4. 5. Find MR = MC Find optimal Q Find optimal P Find ATC Find Profit MC ATC $13 Profit $6 MR 0 15 D Q i>clicker Enhance your grade with active participation Macro Word of the Day “Multiplier Effect” a When word-of-mouth causes products to become popular b When a dollar spent generates many more dollars of spending c When you earn interest on past interest earnings d When you pay more in finance charges than you borrowed Macro Word of the Day “Multiplier Effect” a When word-of-mouth causes products to become popular b When a dollar spent generates many more dollars of spending c When you earn interest on past interest earnings d When you pay more in finance charges than you borrowed QUESTION 1 Loading Results… Famous Economist a Ben Bernanke b Timothy Geithner c Austan Goolsbee d Alan Greenspan Famous Building or Landmark a New York Stock Exchange b Bureau of Labor Statistics c U.S. Treasury d Federal Reserve Bank How long did our most recent recession officially last? a 12 months b 18 months c 24 months d This is a trick question: the recession hasn’t ended Is a person who lost a high paying job and temporarily working at a supermarket unemployed? a Yes, s/he is unemployed b No, s/he is employed How much are you willing to pay for one slice of pizza right now? a $5.00 b $3.50 c $2.00 d $1.00 e $0.00 How much are you willing to pay for one slice of pizza right now? a $5.00 b $3.50 c $2.00 d $1.00 e QUESTION 5 $0.00 Loading Results… 4% 6% 39% 33% 18% Suppose you do not work and have no income. Besides basic necessities, how much do you need per month to get by? a Less than $200 b $400 c $600 d $800 e $1,000 or more Now suppose your rich aunt gives you $1,000/month to spend. How much of this new money would you spend? a Less than $200 b $400 c $600 d $800 e $1,000 (all of it) Aggregate Expenditures Model Aggregate Expenditures (AE) 45º line: Y = AE C DEBT SAVINGS Income (Y) i>clicker Enhance your grade with active participation Homer is fired from the power plant and goes back to school to earn a college degree. Homer is: a still part of the labor force b not part of the labor force Loading Results… A business cycle recovery that doesn’t reach its long-term trend can lead to: a hyperinflation b lower cyclical unemployment c its natural unemployment rate d a double dip recession If the price index is 200, how much did a $4 Big Mac (today) cost in the base year? a $0.40 b $1.00 c $2.00 d $8.00 By Educators. For Students. My Contact Information: By Educators. For Students. E-mail: [email protected] Phone: 561-297-2947 Web: ProfessorChiang.com Twitter: @ProfessorChiang Facebook.com/CoreEconomics