...Chapter 1 What is Macroeconomics? ( Chapter Outline 1. How Macroeconomics Affects Our Everyday Lives (a) The “Big Three” Concepts of Macroeconomics 2. Defining Macroeconomics (a) How Macroeconomics Differs from Microeconomics (b) Economic Theory: A Process of Simplification 3. Actual and Natural Real GDP (a) Unemployment: Actual and Natural (b) Real GDP and the Three Macro Concepts 4. Macroeconomics in the Short Run and Long Run (a) The Short Run: Business Cycles (b) Business Cycle Concepts (c) The Long Run: Economic Growth 5. Case Study: A Century of Business Cycles (a) Real GDP (b) Unemployment 6. Macroeconomics at the Extremes (a) Unemployment in the Great Depression, 1929–40 (b) The German Hyperinflation of 1922–23 (c) Fast and Slow Growth in Asia 7. Taming Business Cycles: Stabilization Policy (a) The Role of Stabilization Policy 8. The “Internationalization” of Macroeconomics IP* Box: How Does U.S. Economic Performance Rank? ( Chapter Overview Chapter 1 begins by introducing a set of three central macroeconomic concepts, called the “Big Three Concepts of Macroeconomics. They are the unemployment rate, the inflation rate, and productivity growth. Introducing the field of macroeconomics to students in this way has an important advantage. It facilitates the early introduction and definition of basic macroeconomic terminology, which gives students a chance to get used to thinking of macroeconomic issues in...
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...study of A) the economic issues which affect individual well-being and individual firms' profit levels. B) the economic issues which affect foreign and domestic prices of related goods and services. C) inflation and poverty at the level of the household. D) the economic issues which affect the nation's total income, employment, and output. Answer: D Question Status: New 2) Political incumbents often gain or lose re-election because of a strong or weak economy. Which of the following is an exception to that rule? A) Al Gore B) George H.W. Bush C) Jimmy Carter D) Herbert Hoover Answer: A Question Status: Previous Edition 3) The "Big Three" concepts of Macroeconomics are A) profits, liquidity, and sustainability. B) unemployment rate, inflation, and economic growth. C) asset rebalancing, markups, and profitability. D) federal budget, foreign trade, and quantitative easing. Answer: B Question Status: New 4) Economy with no productivity growth is called the A) zero-sum society. B) zero-growth society. C) export-led society. D) doomed-to-fail society. Answer: A Question Status: New 5) The inflation rate is the A) measure used to calculate the price level. B) measure used to calculate the cost of borrowing money. C) percentage increase in the average level of prices. D) percentage increase in the average level of wages. Answer: C Question Status: Previous Edition 6) A rising inflation rate tends to help the following types of people: ...
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...Chapter 1: A Tour of the World CHAPTER 1 Prepared by: Fernando Quijano and Yvonn Quijano Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall • Macroeconomics, 5/e • Olivier Blanchard 1-1 The United States Table 1-1 1996–2006 (average) 2006 2007 2008 3.1% 3.4% 3.3% 2.1% 2.5% Output growth rate Unemployment rate 6.2 5.0 4.6 4.6 4.8 Inflation rate The unemployment rate 4.0 2.0 2.9 2.6 2.2 Output growth rate: annual rate of growth of output (GDP). Unemployment rate: average over the year. Inflation rate: annual rate of change of the price level (GDP deflator). 3 of 18 Chapter 1: A Tour of the World The inflation rate The period 1996-2006 was one of the best decades in recent memory: The average rate of growth was 3.4% per year. The average unemployment rate was 5.0%. The average inflation rate was 2.0%. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall • Macroeconomics, 5/e • Olivier Blanchard 1-1 The United States 4 of 18 1-1 The United States Has the United States Entered a New Economy? Should We Worry About the U.S. Trade Deficit? Figure 1 - 2 Figure 1 - 3 Rate of Growth of Output per Hour in the United States Since 1960. The U.S.Trade Deficit Since 1990 The trade deficit increased from about 1% of output in 1990 to about 6% of output in 2006. The average rate of growth of output per hour appears to have increased...
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...Econ 202 Unemployment in the US The unemployment rate in the United States has gone through changes in the past few years. It can fluctuate from high to low depending on our economy’s stability at the time. With the economy in a recent recession the level of unemployment rose. This affected millions of US citizens as well the US GDP levels. When citizens are out of work fewer products are being purchased and retail starts to decline. The US economy is slowly coming out of the financial crisis and recession within the last recent years. It wasn’t until the past year of 2011 did our economy see a positive turn around and unemployment levels began to decline. The Unites States economy has been showing increasingly positive signs throughout the year 2011. The unemployment rate fell recently in 2012 and is continuing to show good signs for a better economy. As of January 2012 the unemployment rate has fell to 8.3% in the Unites States. This is the lowest level the economy has seen since February 2009. Since August 2011 the unemployment rate has decreased by .8%. The widespread unemployment experienced in the last recent years is not the worst the US economy has ever experienced. The unemployment rate in the US averages 5.70 % from 1948 to 2010. The worse rate experienced was a record high for unemployment during November of 1982 with a 10.80% rate. There is hope though for the future with the unemployment rate slowly declining. In last several years...
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...14 MODELS OF UNEMPLOYMENT Chapter 14 Contents A. Topics and Tools ............................................................................ 2 B. Defining Unemployment .................................................................. 3 The statistical definition ................................................................................................3 Problems with the statistical measures ............................................................................4 Natural and cyclical unemployment ...............................................................................6 C. Introduction to Theories of Unemployment........................................... 7 D. Minimum Wages and Unemployment ................................................. 10 A simple minimum-wage model .................................................................................. 10 Minimum-wage effects on skilled and unskilled labor ..................................................... 11 E. Unemployment Insurance and the Length of Job Search .......................... 13 A simple model of job search ........................................................................................ 13 Unemployment benefits and search duration ................................................................. 15 Optimal search duration ............................................................................................. 17 F. Unions and Unemployment ..................
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...B) Individuals changed the way they formed expectations of inflation. C) Individuals assumed that expected inflation would be zero D) Individuals assumed the expected price level for the current year would be equal to the actual price level from the previous year. E) More labor contracts became indexed to changes in inflation. 2) Which of the following will tend to occur when a high proportion of a country's workers have indexed wages? 2) _______ A) The unemployment rate will be relatively high. B) A given change in the unemployment rate will cause a larger change in the inflation rate. C) The unemployment rate will be relatively low. D) The inflation rate will be relatively low. E) none of the above 3) The data suggest that in the European Union countries, the natural rate of unemployment: 3) _______ A) has become less "natural," since it is now almost entirely determined by the policies of a few large corporations. B) is now higher than in the U.S. C) is no longer a relevant concept. D) will soon exceed the percentage of the labor force that is working. E) has steadily declined over the past two decades. 4) Which of the following statements will likely be correct when inflation has not been very persistent? 4) _______ A) The current inflation rate will not depend heavily...
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...the negative relation between unemployment and inflation that was first observed in the United Kingdom. True: According to the reading on page 161, it says the same thing. b. The original Phillips curve relation has proven to be very stable across countries and over time. False: According to the reading on page 161, it states that the relation broke down and in most countries there was both high inflation and high unemployment. c. The aggregate supply relation is consistent with the Phillips curve as observed before the 1970s, but not since. False: According to the reading on page 171, it states that the relation has held quite well, but there are signs of warnings. d. Policy makers can exploit the inflation-unemployment trade-off only temporarily. Uncertain: I am not quite sure if this is true because I could not find in the reading about this being false or true. e. In the late 1960s, the economists Milton Friedman and Edmund Phelps said that policy makers could achieve as low a rate of unemployment as they wanted. Uncertain: According to the reading on page 170, Friedman and Phelps argued that the appearance of a trade-off between inflation and unemployment was an illusion, which it did disappear in the next few years after the 1960s. f. The expectations-augmented Phillips curve is consistent with workers and firms adapting their expectations after the macroeconomic experience of the 1960s. g. The natural rate of unemployment is constant over time within...
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...Supply Models Unemployment Rate in the United States is reported by the U.S. Bureau of Labor Statistics. According to Fedec, the unemployment Rate in the United States increased to 6.20 percent in July of 2014 from 6.10 percent in June of 2014. The U.S. jobless rate increased to 6.2 percent from 6.1 percent in June as more people entered the labor force. Wages and hours were unchanged from the previous month. The rate has declined over the past 12 months by 1.1%. The number of long-term unemployed people (27 or more weeks) did not change at 3.2 million in July. 32% of the unemployed were long-term unemployed. The number of people forced to work part-time was 7.5 million and unchanged. Many of these part-time were doing so because their job cut back hours or they simply could not find full-time work. Unemployment causes consumers to have less money and therefore there is less demand in the economy. The aggregate demand curve shifts to the left. Unemployment also reduces the amount of labor in the workforce and this shifts the aggregate supply curve to the left. A decrease in one of the determinants of aggregate supply shifts the curve to the left. Some examples of a decrease would be output falls below the natural rate of employment, unemployment rises, the price level rises, or stagflation happens. Fiscal policy attempts to mitigate unemployment and stabilize the economy. Tax cuts and increased spending are used in an attempt to fight unemployment. This type of...
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...Running head: Monetary Policy and Its’ Effect on Macroeconomic Factors Monetary Policy and Its’ Effect on Macroeconomic Factors Edward Thaxton University of Phoenix MMPBL/501 Forces Influencing Business in the 21st Century Dr. Sangeeta Bishop March 8, 2010 Abstract This paper will illustrate the affects of The Fed, the creation of money and the monetary policy. The monetary policy has a direct impact upon aggregate demand, gross domestic product, unemployment, inflation, and interest rates. Monetary Policy and Its’ Effect on Macroeconomic Factors In earlier times traders used gold for transactions, and realized that it was inconvenient so they began to make deposits with goldsmiths. The goldsmiths provided the depositor a receipt for the value of their deposit of gold and people began to use the receipts as payments. The goldsmiths backed their receipts fully with the gold that they held in their vaults. These receipts were used as the first kind of paper money. Today, gold is no longer used as bank reserves. This was the beginning of the fractional reserve system of banking, in which reserves in bank vaults are a fraction of the total money supply. The creation of checkable deposit money by banks, limited...
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...world. Since then human history is also a history of migration. Migration has always been a strong impetus towards human development, these days however migration is often seen as problem or threat. Migration is defined as the permanent change of residence of a person or group. It is a natural social phenomenon. Humans have colonized the entire world and penetrated its remotest areas. Migration is taking place within very different contexts: f.e. military conquest, refugees, expulsion or enslavement. But migrants have also traveled in search of economic opportunities, new settlement areas or trade routes. Currently approximately 216,000,000 people are living away from their place of birth. This number equals about 3% of the world population. Analyzing the reasons for migration one distinguishes between push and pull factors - often both appear together. Push factors are circumstances in the country of origin that lead people to emigrate, for example poverty, war or environmental disasters. Pull factors are conditions in the destination country that make immigration attractive such as economic opportunity and political freedom. Overall trends By far the most immigrants live in the United States followed by Russia and Germany. The main countries of origin are Mexico, India, China and Russia. In proportion to the population Persian Gulf countries host the largest share of migrants - about 35% of their population. They mostly come from South Asia and Egypt. Most migrants in...
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...Question #1: Stimulating the economy is accomplished in one of two ways. The government can increase government spending or decrease taxes. Both ways have positives and negatives on the economy. First, the positives of increasing the government spending while keeping the tax rate unchanged are as follows. If the government increases spending aggregate demand will be directly affected by the increase. If the demand increases, prices will rise until supply and demand are again at an equilibrium. The new equilibrium and GDP will be increased by an amount equal to the increased spending. Further, the multiplier effect of the government spending, when the government increase spending on purchases it will create more job opportunities. This will increase consumer spending which will encourage private investment spending to meet the demand. In turns that will create more jobs in the economy. The negatives of increasing government spending are as follows. It is very important to remember that government spending to stimulate the economy is not free. The funds are not going to come from thin air. The government has two options to generate the money without increasing taxes, borrowing the money domestically, or from foreign governments. Both cases increase the national debt, or cut some government programs to stimulate others. Borrowing the money domestically, from local investors, will stop these investors from creating new businesses. This will lead to less job creation...
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...by utilizing methods of hydraulic fracturing. The process of hydraulic fracturing is by no means a new technique, having been used in oil and gas wells throughout the United States since 1947. Hydraulic Fracturing is an extremely efficient technique used in the extraction of oil gas and other fluids. The process involves injecting high-pressure fluids, containing sand or a similar substance, into the earth, creating fractures hundreds of feet long that branch out from a central drill hole. The fractures are held open by the substance in the fluids being injected, increasing the permeability, which allows the oil and gas to effortlessly flow through and into the well where it is then extracted. Fracturing has been continuously evolving due to innovations and advances in technology. An example of this growth is the introduction of horizontal drilling in the early 2000s which has allowed access to oil, gas, and shale reserves that were previously unobtainable by earlier methods or reserves that were not economically viable to develop. Hydraulic Fracturing is an extremely important and beneficial process that is used by an overwhelming majority of oil and gas producers in the United States. A study conducted by the U.S. Energy Information Administration found that the amount of active “gas wells in the United States increased from approximately 260,000 wells in 1989 to 493,100 wells in 2009.”(Number) Furthermore, according to the Federation of...
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...Randy M. Little Business Economics GM545 randym.little@gmail.com Why is frictional unemployment important? To discuss why frictional unemployment is important to the economy, one must understand what the terms mean. Frictional unemployment is when people are unemployed because they are seeking better positions. These individuals could be recent college graduates or people who are between jobs/waiting to start a new position (voluntary or involuntary). Stay at home parents returning to work. Friction unemployment should be viewed as a short unemployed term because those people are actively seeking new employment. The reason why frictional unemployment is important is because it allows the economy to be flexible, mobile and the choices of jobs are readily available for people to seek and choose from (Nayab. 2010). When there are options for individuals to seek better employment opportunities, it benefits companies as well. It encourages the individuals to find work that is going to be suited to their needs and skills (Carter, June 2011). That is a great benefit as people begin to hold out for the position they seek and not settling for a job just to have one. If the frictional unemployed start to take a position just for the sake of having a job, they will continue to seek other jobs of their choice and when one is found they would vacate their current position. The companies are able to seek, recruit, hire and retain a more skilled labor force. This truly benefits...
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...of goods and services in a specific country or region. The United States of America is known across the entire world as having the largest economy. The economy in the United States today is now where near what it was many years ago. The current economic situation has the country trying to regain its high economic status. The United States economy is really not good in its current state, but somewhat better than it was five years ago. Many people are not aware of the problem that we have in this country. I think that the biggest question in this country in reference to the economy is how we got to this place, with this economy. There is so much blame and finger pointing as to how the United States economy ended up this way. My opinion is that part of the problem in this country is that we depend on other countries to produce things for us that we could or should produce ourselves. The United States economy has changed and somewhat stayed the same as compared to five years ago. Points in this paper that will be discussed will be exports, imports, interest rates, inflation and unemployment. Exports are defined as goods or services produced in the United States and sold in another country. (O'sullivan) Imports are goods and services produced in a foreign country and purchased by residents of the home country. (O'sullivan) The United States is the world’s largest importer. The main import of the United States is crude oil and the problem with oil prices has been the...
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... | | Herbert Hoover | | | | Jimmy Carter | | | | Points Received: | 2 of 2 | | Comments: | | | | Question 2. | Question : | The unemployment rate is the number of | | | Student Answer: | | jobless individuals looking for work divided by those employed and unemployed but actively looking. | | | | jobless people looking for work divided by the population. | | | | people looking for work divided by the population. | | | | jobless individuals divided by the total labor force. | | | | Points Received: | 2 of 2 | | Comments: | | | | Question 3. | Question : | Which of the following statements about the behavior of the unemployment rate in the United States is true? | | | Student Answer: | | The unemployment rate in the most recent recession involved a peak rate of unemployment lower than the peak rate of the recession before it. | | | | Between 1960 and 2004, the unemployment rate has fluctuated between 3.4% and 6%. | | | | Generally, when the actual level of output is above the natural level of output, the actual level of unemployment tends to be above the natural level of unemployment. | | | | Generally, when the natural level of output is above the actual level of output, the actual level of unemployment tends to be below the natural level of unemployment. | | | | Points Received: | 0 of 2 | | Comments: | | | | Question 4. | Question : | The inflation rate is the | | | Student Answer:...
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