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AMU ECON 201 - Principles of Macroeconomics
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Slide 1Slide 2Slide 3Slide 4Recessions and ExpansionsFluctuations in U.S. Real GDP, 1920-2001Slide 7Slide 8U.S. Recessions Since 1929Slide 10Slide 11The Phases of the Business CycleBusiness CyclesU. S. Business CyclesSlide 15Slide 16Some Facts About Short-term Economic FluctuationsReal GDP Growth in Five Major Countries, 1999-2002Slide 19U.S. Inflation, 1960-2001U.S. Unemployment RateOutput Gaps and Cyclical UnemploymentSlide 23Slide 24Slide 25Potential OutputSlide 27Slide 28Slide 29Actual OutputSlide 31Slide 32Slide 33Slide 34Slide 35Slide 36Slide 37Slide 38Slide 39The Rate of UnemploymentSlide 41The Natural Rate of UnemploymentSlide 43Slide 44Slide 45Slide 46Slide 47Okun’s LawSlide 49Example 12.1Slide 51Plain English EconomicsSlide 53Slide 54Slide 55Why Do Short-Term Fluctuations Occur? A Preview and a ParableWhy Do Short-Term Fluctuations Occur? A PreviewSlide 58Slide 59Slide 60Slide 61Why Do Short-Term Fluctuations Occur? A ParableSlide 63Slide 64The Historical Development of Modern MacroeconomicsThe Historical Development of Modern MacroeconomicsFrom Classical to Keynesian EconomicsClassical EconomicsSlide 69Say’s Law and Potential OutputSlide 71The Possibility of UnemploymentThe Paradox of ThriftThe Essence of Keynesian EconomicsSlide 75Slide 76Equilibrium Income FluctuatesKeynesSlide 79Slide 80Short-TermEconomic Fluctuations: An IntroductionShort-TermEconomic Fluctuations: An IntroductionPrinciples of Macroeconomics Dr. Gabriel X. MartinezAve Maria UniversityChapter 25: Short-Term Economic FluctuChapter 25: Short-Term Economic Fluctuations: An Introductionations: An Introduction22Copyright c 2004 by The McGraw-HillCompanies, Inc. All rights reserved. Posted: 02/01/2001 12:24 amPosted: 02/01/2001 12:24 amLast Updated: 2001-02-01 10:49:54-05Last Updated: 2001-02-01 10:49:54-05The Federal Reserve has cut interest The Federal Reserve has cut interest rates for the second time this month. rates for the second time this month. With so many area businesses With so many area businesses closing, Michiana residents worry it closing, Michiana residents worry it may be too late to save the economy may be too late to save the economy from slipping into recession. from slipping into recession. Mark Eagen, the president and CEO of Mark Eagen, the president and CEO of St. Joseph County's chamber of St. Joseph County's chamber of commerce, is watching Michiana's commerce, is watching Michiana's economy closely and says it is slowing economy closely and says it is slowing down. While consumer spending has down. While consumer spending has obviously decreased, companies are obviously decreased, companies are feeling the effect. feeling the effect. Closed in South Bend, February 2001Chapter 25: Short-Term Economic FluctuChapter 25: Short-Term Economic Fluctuations: An Introductionations: An Introduction33Copyright c 2004 by The McGraw-HillCompanies, Inc. All rights reserved. Local effectsLocal effects Plant closings like Bayer in Plant closings like Bayer in Elkhart, bankruptcies like OMC Elkhart, bankruptcies like OMC Boats in Syracuse, along with Boats in Syracuse, along with the shutdown of Montgomery the shutdown of Montgomery Ward, L.S. Ayers and Ward, L.S. Ayers and Thermoplastics, as well as the Thermoplastics, as well as the downsizing of Whirlpool have all downsizing of Whirlpool have all taken a major toll on the area.taken a major toll on the area.Closed in South Bend, February 2001Chapter 25: Short-Term Economic FluctuChapter 25: Short-Term Economic Fluctuations: An Introductionations: An Introduction44Copyright c 2004 by The McGraw-HillCompanies, Inc. All rights reserved. According to Tyler Glynn of Edwards Jones According to Tyler Glynn of Edwards Jones Investments, “We feel a recession, or the Investments, “We feel a recession, or the effects of a possible oncoming of a recession, effects of a possible oncoming of a recession, more than other parts of the country because more than other parts of the country because we have so much of a base in manufacturing.” we have so much of a base in manufacturing.” Ray of hopeRay of hopeWhile all the closings have left many people While all the closings have left many people jobless, a ray of hope is on the horizon. AM-jobless, a ray of hope is on the horizon. AM-General, an auto plant opening in Mishawaka, General, an auto plant opening in Mishawaka, will manufacture a new generation of the will manufacture a new generation of the Hummer 4-wheel drive sport utility. The Hummer 4-wheel drive sport utility. The additional 1500 jobs should make up for the additional 1500 jobs should make up for the recent loss in Michiana, but experts continue recent loss in Michiana, but experts continue to watch the economy closely. to watch the economy closely. Closed in South Bend, February 2001Chapter 25: Short-Term Economic FluctuChapter 25: Short-Term Economic Fluctuations: An Introductionations: An Introduction55Copyright c 2004 by The McGraw-HillCompanies, Inc. All rights reserved. Recessions and ExpansionsRecessions and ExpansionsRecession (or contraction)Recession (or contraction)A period in which the economy is growing at a rate A period in which the economy is growing at a rate significantly below normalsignificantly below normalThe NBER does not define a recession in terms of two The NBER does not define a recession in terms of two consecutive quarters of decline in real GDP. Rather, a consecutive quarters of decline in real GDP. Rather, a recession is a significant decline in economic activity spread recession is a significant decline in economic activity spread across the economy, lasting more than a few months, across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.industrial production, and wholesale-retail sales.•For more information, see the latest announcement on how the For more information, see the latest announcement on how the NBER's Business Cycle Dating Committee chooses turning NBER's Business Cycle Dating Committee chooses turning points in the Economy and its latest memo, dated 07/17/03. points in the Economy and its latest memo, dated 07/17/03. DepressionDepressionA particularly severe or protracted recessionA particularly severe or protracted recessionChapter 25: Short-Term Economic FluctuChapter 25: Short-Term Economic Fluctuations: An


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AMU ECON 201 - Principles of Macroeconomics

Course: Econ 201-
Pages: 80
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