These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute. !!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!Lecture!9!Outline(of(Last(Lecture((I. Aggregate!Supply!II. Aggregate!Demand!III. Market!Supply!IV. Market!Demand!V. Business!Cycle!a. Four!Stages!Outline(of(Current(Lecture((I. Business!Cycle(a. The!Trough(II. Keynes(a. Say’s!Law!and!Classical!Economists(b. Keynes’!Assumptions!((Current(Lecture(1. Busi n ess!Cycl e((! The!government!tries!to!“smooth”!out!the!Business!Cycle;!that’s!why!politicians!are!elected!into!office.(! The!Federal!Government’s!step!and/or!place!during!a!downturn!(Recession)!are!to!lower!interest!rates!in!order!to!increase!(keep!up)!investment!(borrowing!money).(a. The!Trough:(i. Low!Interest!Rate(ii. High!Unemployment(iii. Low!Capacity!–!Utilization(!!((((((ECON(104(((11th(Edition(! !iv. Compliant!Labor!Force(1. Low!Wages/Stable!Wages(! When!Unemployment!falls,!more!skilled'workers!are!hired.(o Prices!start!to!increase(o It!becomes!more!expensive!to!put!out!more!output(1. Keynes:!Considered!the!greatest!Economist!of!the!20th!Century.!His!eyes!have!fundamentally!affected!the!theory!and!practice!of!Macroeconomics.(a. Say’s!Law:!“Supply!creates!its!own!Demand”!or!in!different!terms,!“the!controversial!assertion,!found!in!classical!economics,!that!aggregate!production!necessarily!creates!an!equal!quantity!of!aggregate!demand.”(i. Classical!Economists!believed!in!this!idea(! Keynes!idea!was!that!the!Federal!Government!should!step!in!and!stimulate!the!economy.(b. Keynes’!Assumptions:(i. Prices!are!Fixed(ii. Interest!Rate!is!Given(iii. No!Government,!No!Taxes(iv.
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