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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)