The National Economy Notes

the Nahomal tonomy The Business Cycle Graph (Y) GDP peak (Gross The total value of • Domestic goods + services Prosuct) produced in an economy during a given penad of time. Trough Time (x) reak: Highest point Trough: Lowest point Where rue in the US economy? (Different from Japan...) - expansion In contraction, u def lose jobs - contraction r expansion y opposites Expansion is great! Trump says were in it Inflation makes economy → (makes price go up) Deration makes economy + (mates prie go doun) > both bad full employment* pres Escal polky: Gvnt expenditure + tax policy to promote macro objectives. spending is the key determinant of the level of output + employment in the economy (The gut should be spending more to fight the depression) Goak of the Macroeconomy - Full employment Does NOT mean 0%% unemployment - Starte Aries (wish to avoid inflation) - Economic Growth Dual mandate Ex of micro unemployment: Taysrus Closing down Ex of micro inflation: Superbowl tickets going T Ex of micro economic growth: Macys going 7 - If we have high unemployment, we increase gut spending, when gut spends, it gives I to buinesses, and busnesses expand, and they hire more workers, and Unemployment goes doun - U can change the monetary policy ($ supply) to promote macro Link b/w macro+ micro: Approaching full emplayment, economy getting healthier + healthier (macro) → Easier to buy specific good Ex.) pay for a car cheaper (mico). - Strong economy makes it possible for poducts to sell @ high prices. Ex.) wimbleton tickets Ex.) China tad economy - interest rate that banks Charge each other when they charge shot. time loans: Federal funds pate - Monetary policy sequence during • 1 Money → 1 Loans → V interest rate → 1 Aggregate demand → TGDI -preempt: catch the problem before it happens - Gut pumps 15 when , economy slows down, but shad do this before - The sequence von work if we dont take preempt into account Chapter 1 Terms : • production Possibilities curve • Scarcity • Choice apportunity cost. Monetary vs. fiscal policy : fiscal involves gut (for V.S, fiscal is unefficient be we need both House + senate to come up w/ a similar policy + agree ul each other / in monetary, its the federal eserve syst dal minate • full empicyment = stable pries uny might the sequence nor work? (PH→T Loan ....) - What if pol dont want to take out loans ic wint if the business is at severe contraction? (If recession, no one is't going to tarow is to go build Heir economy duh - me function can only work it the elenomy has not gone down too. severely d taxes = T spending 8 - Who do we give the tax cuts on? - poor pol be theyll spend the A more + thats the goal (Spending is the key determinant...) Pgut expenditure US. l taxes (which is better?) - sume gut is e sen in bring core rather than giung to poor ppl who will only spend some During the recesion, fiscal policy (tre que) disappeared be they didnt want to spend more + give back more I be then they will have a deficet (debt) BuT if they just did this then pol would have more t and spend more + pay more taxes + the gut would be good again: - Their decision was pure political motivation counter cyclical budgetary policy: the guts budget policy should organized to counter the business cycle - If the economy has severe recession, its an appropriate counter cyclical budgetary policy to have deficits (but this actually didnt happen ") gut should I expenditure or taxes in order to fight the recession If the economy is suffering, ppl will want to spend less i bringing the macro economy d " Paradox of thrift: Everyone looks to protect themselves + save their I, but now the economy collapres OFFICTALLY staming Chapter 1 Production Posibilities Curve: indicates the various possibleries combinations of output that sociery can prosuce when all of its resources are fully uhlized in their most efficient mamer porsible. • Locking at society in this moment of time • Potential Guns - indicate scarcily (less going to the privare sector) - today, its not possibie to produce at point * (unattainable) Butter be point A represents a point @ which all our resarces r bong used in their roost efficient manner. At point X, more guns + more butter would need to be produced (unattainast point) - This shous our current potential + proves scarcing During Hurricane katrina, the amant of salliers we had to help withe bunion were scare be they were all fighting in Iraq Opportunity Cost : The best available alternative that must be fugone in order to obtain something else (what l give up to get Something eise) • Ex.) giving up sleee, inome time... to be here - At point x, al of the resoures arent being folly utilized - At point A, society is using all of the resaxies in the most eFficient manner Butter - producing less guns + less butter at point X (inefficient use of resares -underemployed resourcs,- unemployed resources) what could we do to go from inside the wive → the wire? If we move from X→ A (2* (une) is there an opportunity cost in doing so? What could we do to get society to move from X→ A? - Prediction Possibilities Curve # 1 - indicates potential be we will reach our potental when all of its resources & being fully utilized * isuunatainabe be everything is already being utilized at paint A BuT in the future it could get there be this is only for a "moment of time" CuNe # 2 - X is inefficient use of resources be its underproduced in both categones Well How Do We Get The curve To Rise Up? Ofiscal policy @ gut expenditure 3 monetary policy pe-training unskillful employees What is the opportunity cost from moung from x to a? (Curve $2) - NOTHING! unlized It would be best if we did, resources r meant to be fully Chapter 3 (leads to Chaptec 8) - Supply + demand r basic tools in the study of economics. They help us understand what causes the price of a good or service to be what it is and what causes the price of a good or service to cham - Superbowl Sunday is the best time to get marnied los be the demand for wedding halls + venues r so low be obvs so many PP r watching it (left-ward shift in demand) + a lot of ppl want come. = i use of of sole resources (nie bal) - 1 demand for face masks so price 1 (rightward shift in demand - 4 demand for airtravel → China -+ demand oil by China (oven tho they consume 6% of the worlds oil - now its 3°% - rebelion in Hong Kung / t hotel pries be no ore wants to go there w/ rebellion going on - Idemand for knick tickets be they suck so secondary ticket. holders → price REMELL Cave #2 X: Can u prove that point x is underemployed resources based on the definition of production possibilities cure? - point x shaus fewer goods of toth being produced compared to point A. (not all resources r being used, even tho it can be) No opportunity cost of moving from x→ a uns - graph shifting inward OH NO! terrible situation for a butter country - war can cause a cove to shift inward, natural disaster decrease in population - standard of living significantly decreases Which is worse #3 or # 2?- #3 is worse | In # 2 atleast u have the opportunity to reach your potential but in #3 your potential decreases al nan - human capital: society investing resources to teter ppi (ex. investing in education) - physical: machinery, equipment... Consumer goods - What can gut society do to promote investment in capital goods? Chapter 3 Terms • Supply + demand | demand cuNe/determinants of demand equilibrium/ factors causing equlibrium to change • Taste can also effect the demand curve (its one of the 5 determinants of. demand) DON'T need to memorize t What can be done to Encourage Investment? (all of these can I capital goods + shift cure • repatriation of money overseas (bring $ back home * spend it here 2 Reduce regulations on business. Capital 3 Lower corporate tay rares * Tax credits for investment (great) Curve #5- 6 00d5 (makes expansion (makes exp. easier) © MP and R. (Marginal Product and Revenue) @TAP and Pell Grauts (Tap-NA /PELL-federal) consumer gods PLANE for educasia I work permits for Skilled Foreigners Accelerated Depreciation (May help reduce tates in a shorter amount of hine) beterminants of demand (mey cause the cure to shift in 1 direction or another) Tastes Price of other goods. Expectations. Income No. of buyers for curve # 41, point B is better because capital goods is better Ex.) better health, more education If mortgage rares t, it helps housing If expectation t, demand for something t @Pice of 1, QDS QS: there is a shortage @Price of 4, QS> QD : there is a surplus @ price of 2 QD = QS: there is equilibrium : balance/ A point at which there is no tendency for change to occur (at this moment in time - later, the determinants can come into play At micro equilibrium, go: 95 at a certain price at this moment in time price gauging: Taking advantage of the consumers during a crisis Fremand for business cas airplare seats → demand for hoteis in China + demand for cruise ships - Chapter 8 says the econony is inhereny stable, so u dont need gut interfere "loispa -Anire"roge ce As (aggregate supply) AD (aggregare demoni) • : - aggregate demand and aggregore supply affect the business cycle and cause the economy to expard or contract. real output Not important but I'll just write it dawn + Unemployment 10|29 GDP $ 30% year later 9% 10/33 257. - demonstrates that the economy is not inherently Stable so we do need gut interference. Sets the stage for the understanding of the business cycle. "of/~ we can come up wi policy to fight the business cycle and to achieve full employment and stable paces (macroeconomy goos) "aggregate" reans demand so macroeconomy rather than normal demand and supply cune for micro average price of all goods produced and real output of all goods produced in society on Curve #18, OF means full employment The coronavirus is shifting AD for both China + America to the (macro disturbance) Macro Failure avg A S - this is recession /contraction be eguilibrim is not @F. (full employment) we want to shift AD curve to the rignt - we do this 4- shous unemployment by having the central bank pump $ into the economy (shows undesirable equilibnin 1 5 arty → 1 bank laps → L interest rate → 1 aggregare demon → T GDP - this is use of 8l and credit to promote macio ob,ectives (full employment. Stable prices - or we could also use fiscal policy by 1 qut expenditue or v taxes. Thi will shift the full employment to full employment. - Which would be better for fighting micro failure? / Tgut expenditure or v taxes) ? - macho failure cout be a result of severe infiation? What & the monetary. fiscal policy we should take? (snow it graphically) - Chapter 6) - Reasors for unemployment / Types of unemploymen+/ Full employment Articles * (l of 5 options) @ corona virus wreaks havoc on airlines - Determinant of demand: Taste (wouldnt a on test tho be too many right options) @ Viewers drop pay TV @ Fast rate - Determinant of demand : Price of othe goods ( like Netflix 101) 3 As Tump travels to India, vacancies in Tump towers slow doun: Income be Indian economy is slowing dawn so ppt cant afford it - * * Determinant of demand shift the graph left to right but change in quantry demanded moves it up and down (I think) * - going back a litte to monetary + fiscal policy to fix Curve #9 - for monetary: u pump & into the banking system in older to give ond