EFLATIONARY GAP M.POURHOSSEINI. MACROECONOMIC BACKGROUND IN THIS TUTORIAL WE REVIEW SOME BASIC MACROECONOMIC AGGREGATESIN THIS TUTORIAL WE REVIEW SOME.

Slides:

Advertisements

Similar presentations

DETERMINATION OF NATIONAL INCOME in the Keynesian Model

Advertisements

PART 5 ECONOMIC FLUCTUATIONS 14 AS-AD and the Business Cycle CHAPTER.

Principles of Economics:

Principles and Policies I: Macroeconomics

Chapter 12.2 Business Cycles Four Phases of the Business Cycle Expansion /Recovery Peak - Contraction /Recession Trough - What is the long term trend in.

Macroeconomic Equilibrium

25 Demand-Side Equilibrium: Unemployment or Inflation? A definite ratio, to be called the Multiplier, can be established between income and investment.

ECON 100 Tutorial: Week 15 office: LUMS C85.

Keynes and the Evolution of Macroeconomics

Introduction to Macroeconomics

Fiscal Policy-Modules 20/21

Chapter 11.  Explain the Keynesian view of fiscal policy  Understand how fiscal policy affects the economy.  Evaluate the effectiveness of fiscal policy.

1 Chp. 8: Business Cycles Focus: What is business cycle? Characteristics of Business Cycles Stylized facts about business cycles.

22 Aggregate Supply and Aggregate Demand

Economic Fluctuation and the Business Cycle

Slides are prepared by Dr. Amy Peng, Ryerson University Chapter Five Output, Business Cycles, and Employment Macroeconomics by Curtis, Irvine and Begg.

Chapter 9: Introduction to Economic Fluctuations.

THE AGGREGATE DEMAND/ SUPPLY MODEL

ECONOMICS: Principles and Applications 3e HALL & LIEBERMAN © 2005 Thomson Business and Professional Publishing The Stock Market and the Macroeconomy.

MACROECONOMICS BY CURTIS, IRVINE, AND BEGG SECOND CANADIAN EDITION MCGRAW-HILL RYERSON, © 2010 Chapter 6 Output, Aggregate Expenditure, and Aggregate Demand.

The Expanded Model of Income Determination. Expanded model of income determination In chapter 14, a very basic Keynesian model of income determination.

Aggregate Supply.

Jump to first page Copyright ©2006 Thomson Business and Economics. All rights reserved. The Great Depression and the Keynesian View.

Chapter 9 Demand-Side Equilibrium: Unemployment or Inflation? A definite ratio, to be called the Multiplier, can be established between income and investment.

MACROECONOMIC BACKGROUND 1 M.Pourhosseini. MACROECONOMIC BACKGROUND IN THIS TUTORIAL WE REVIEW SOME BASIC MACROECONOMIC AGGREGATESIN THIS TUTORIAL WE.

 Circular Flow of Income is a simplified model of the economy that shows the flow of money through the economy.

Spending, Income, and Interest Rates Chapter 3 Instructor: MELTEM INCE

Chapter 12 Econ104 Parks Fiscal Policy. Stabilization Policy Stabilization policy is an attempt to dampen the fluctuations in the economy's level of output.

Unemployment, Inflation and Growth. Money and Prices The quantity theory of money The equation of exchange: MV = PY –M money supply –V velocity of circulation.

The Aggregate Expenditures Model 11 McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

“ I believe myself to be writing a book on economic theory which will largely revolutionize—not, I suppose, at once but in the course of the next.

MACROECONOMICS BY CURTIS, IRVINE, AND BEGG SECOND CANADIAN EDITION MCGRAW-HILL RYERSON, © 2010 Chapter 11 Monetary Policy and Fiscal Policy in the Short.

Business Cycle Three Types of Business Cycle Business Cycle Phases Business Cycles as shifts in AD and AS Business Cycle Theories.

MACROECONOMICS BY CURTIS, IRVINE, AND BEGG SECOND CANADIAN EDITION MCGRAW-HILL RYERSON, © Chapter 5 Output, Business Cycles, and Employment.

8. Determination of National Income and the role of Fiscal Policy

Determination of National Income and the Role of Fiscal Policy.

 Economic Growth in Canada  Before World War I (1870 – 1914)  Canada’s growth was gradual  Until 1973, there was steady growth in per-capita income.

Macroeconomics. Chapter One Introduction Macroeconomics : 1. Definition - macroeconomics is concerned with the behavior of the economy as a whole-----booms.

When you have completed your study of this chapter, you will be able to C H A P T E R C H E C K L I S T Provide a technical definition of recession and.

AS - AD and the Business Cycle CHAPTER 13 C H A P T E R C H E C K L I S T When you have completed your study of this chapter, you will be able to 1 Provide.

Fiscal Policy Government Intervention in the Free Market?

Economic Instability Macroeconomics Principles. Business Cycles Cycle: Systematic ups and downs of GDP Natural Inevitable Necessary? Phases –Recession:

Interest rate (r ) Inflation rate (π) Fed Reaction Rule If the Fed sees the inflation rate rising… …it moves to raise interest rates r0r0 r1r1 π1π1 π0π0.

SSEMA1 The student will illustrate the means by which economic activity is measured. E. Define the stages of the business cycle; include peak, contraction,

Objectives After studying this chapter, you will able to  Explain what determines aggregate supply  Explain what determines aggregate demand  Explain.

What Macroeconomics is about Structure and performance of national economies Policies that governments formulate and use to affect economic performance.

Principles of Macroeconomics Lecture 4 BUSINESS CYCLES AND AGGREGATE DEMAND.

PowerPoint Slides prepared by: Andreea CHIRITESCU Eastern Illinois University 1 © 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned,

AS - AD and the Business Cycle CHAPTER 19 C H A P T E R C H E C K L I S T When you have completed your study of this chapter, you will be able to 1 Provide.

Economics Bingo!. Choose 5 words from each column Fill in your own Economics Bingo Card Listen to the definitions of the words Each turn, circle the box.

Change in Quantity demanded –Movement along the curve –Result of a change in the price –Other factors remain constant Change in Demand –A shift in the.

CHAPTER OUTLINE 13 The AD /AS Model Dr. Neri’s Expanded Discussion of AD / AS Fiscal Policy Fiscal Policy Effects in the Long Run Monetary Policy Shocks.

IB Economics SL Syllabus Content Review Section 3: Macroeconomics.

3.3: Macroeconomic Models. Aggregate Demand Components AD=C+I+G+X-M AD=C+I+G+X-M How does the AD curve (and diagram labels) differ from a simple demand.

7 AGGREGATE DEMAND AND AGGREGATE SUPPLY CHAPTER.

Types of Inflation, Disinflation, and Deflation Is Inflation Always a Bad Thing?

9 9 Demand-Side Equilibrium: Unemployment or Inflation? A definite ratio, to be called the Multiplier, can be established between income and investment.

Question #1 Discuss the view that unemployment is a more serious economic problem that inflation. Why might Keynesian and Monetarist economists disagree.

Simple Keynesian Model

Chapter 6 Business Cycles and Short-Run Macroeconomics—Essentials of the Keynesian System PowerPoint Presentation by Charlie Cook Copyright © 2004 South-Western.

Figure 9.1 U.S. Real GDP and NBER Recessions

Figure 9.1 U.S. Real GDP and NBER Recessions

2.1 The Level of Overall Economic Activity

CHAPTER 1 INTRODUCTION TO MACROECONOMIC

Aggregate demand and aggregate supply

Reading the Business Cycle

Aggregate Supply & Demand Model

Presentation transcript:

EFLATIONARY GAP M.POURHOSSEINI

MACROECONOMIC BACKGROUND IN THIS TUTORIAL WE REVIEW SOME BASIC MACROECONOMIC AGGREGATESIN THIS TUTORIAL WE REVIEW SOME BASIC MACROECONOMIC AGGREGATES The purpose is to provide the students whose first degree is not economics with some basic toolsThe purpose is to provide the students whose first degree is not economics with some basic tools The tutorial will focus on deflationary gap,The tutorial will focus on deflationary gap, and accelerator principle and accelerator principle

UNEMPLOYMENT AND INFLATION IN THE SIMPLE KEYNESIAN MODEL The deflationary gap – –withdrawals and injections approach The deflationary gap – –withdrawals and injections approach

The deflationary gap O Y W W, J J YeYe

O Y W J YeYe YFYF The deflationary gap

O Y W W, J J YeYe YFYF Deflationary gap c d The deflationary gap

UNEMPLOYMENT AND INFLATION IN THE SIMPLE KEYNESIAN MODEL The deflationary gap – –withdrawals and injections approach – –income and expenditure approach The deflationary gap – –withdrawals and injections approach – –income and expenditure approach

O Y W, J, E YeYe YFYF Y E The deflationary gap

O Y YeYe YFYF Y E a b Deflationary gap W, J, E The deflationary gap

O Y W J YeYe YFYF c d Y E a b Deflationary gap W, J, E The deflationary gap

UNEMPLOYMENT AND INFLATION IN THE SIMPLE KEYNESIAN MODEL The deflationary gap – –withdrawals and injections approach – –income and expenditure approach The inflationary gap The deflationary gap – –withdrawals and injections approach – –income and expenditure approach The inflationary gap

UNEMPLOYMENT AND INFLATION IN THE SIMPLE KEYNESIAN MODEL The deflationary gap – –withdrawals and injections approach – –income and expenditure approach The inflationary gap – –withdrawals and injections approach The deflationary gap – –withdrawals and injections approach – –income and expenditure approach The inflationary gap – –withdrawals and injections approach

The inflationary gap O Y W W, J YeYe J

O Y W YeYe YFYF J The inflationary gap

O Y W W, J YeYe YFYF g h Inflationary gap J The inflationary gap

UNEMPLOYMENT AND INFLATION IN THE SIMPLE KEYNESIAN MODEL The deflationary gap – –withdrawals and injections approach – –income and expenditure approach The inflationary gap – –withdrawals and injections approach – –income and expenditure approach The deflationary gap – –withdrawals and injections approach – –income and expenditure approach The inflationary gap – –withdrawals and injections approach – –income and expenditure approach

O Y YeYe YFYF Y E W, J, E The inflationary gap

O Y YeYe YFYF Y E Inflationary gap e f W, J, E The inflationary gap

O Y YeYe YFYF Y E Inflationary gap e f W J g h W, J, E The inflationary gap

UNEMPLOYMENT AND INFLATION IN THE SIMPLE KEYNESIAN MODEL Inflation and unemployment at the same time – –inflationary pressures before the full-employment level of income – –implications for shape of AS curve Inflation and unemployment at the same time – –inflationary pressures before the full-employment level of income – –implications for shape of AS curve

Unemployment and inflation O Y Price level YFYF AS 1

O Y Price level YFYF AS 2 Unemployment and inflation

UNEMPLOYMENT AND INFLATION IN THE SIMPLE KEYNESIAN MODEL Inflation and unemployment at the same time – –inflationary pressures before the full-employment level of income – –implications for shape of AS curve – –relationship between 45° line diagram and the AD & AS diagram Inflation and unemployment at the same time – –inflationary pressures before the full-employment level of income – –implications for shape of AS curve – –relationship between 45° line diagram and the AD & AS diagram

Allowing for inflation in the 45 Allowing for inflation in the 45  line and AD / AS diagrams P C d, W, J, E Y Y AS AD 1

Allowing for inflation in the 45 Allowing for inflation in the 45  line and AD / AS diagrams P C d, W, J, E Y Y AS P1P1 Y1Y1 AD 1

Allowing for inflation in the 45 Allowing for inflation in the 45  line and AD / AS diagrams P C d, W, J, E Y Y AS P1P1 Y AD 1 E1E1 Y1Y1

Allowing for inflation in the 45 Allowing for inflation in the 45  line and AD / AS diagrams P C d, W, J, E Y Y AS AD 1 P1P1 Y AD 2 E1E1 Y1Y1

Allowing for inflation in the 45 Allowing for inflation in the 45  line and AD / AS diagrams P C d, W, J, E Y Y AS AD 1 P1P1 Y AD 2 E1E1 E2E2 Y1Y1 Y2Y2

Allowing for inflation in the 45 Allowing for inflation in the 45  line and AD / AS diagrams P C d, W, J, E Y Y AS AD 1 P1P1 Y1Y1 Y E1E1 AD 2 E2E2 Y2Y2 P2P2

Allowing for inflation in the 45 Allowing for inflation in the 45  line and AD / AS diagrams P C d, W, J, E Y Y AS AD 1 P1P1 Y1Y1 Y E1E1 AD 2 E2E2 Y2Y2 E3E3 Y3Y3 P2P2

KEYNESIAN ANALYSIS OF THE BUSINESS CYCLE The accelerator – –changes in national income and induced investment The accelerator – –changes in national income and induced investment

The accelerator effect

KEYNESIAN ANALYSIS OF THE BUSINESS CYCLE The accelerator – –changes in national income and induced investment – –the accelerator coefficient The accelerator – –changes in national income and induced investment – –the accelerator coefficient

KEYNESIAN ANALYSIS OF THE BUSINESS CYCLE The accelerator – –changes in national income and induced investment – –the accelerator coefficient – –the instability of investment The accelerator – –changes in national income and induced investment – –the accelerator coefficient – –the instability of investment

Fluctuations in real GDP and investment:

GDP

Fluctuations in real GDP and investment: GDP Investment

KEYNESIAN ANALYSIS OF THE BUSINESS CYCLE The accelerator – –changes in national income and induced investment – –the accelerator coefficient – –the instability of investment The multiplier / accelerator interaction The accelerator – –changes in national income and induced investment – –the accelerator coefficient – –the instability of investment The multiplier / accelerator interaction

KEYNESIAN ANALYSIS OF THE BUSINESS CYCLE The accelerator – –changes in national income and induced investment – –the accelerator coefficient – –the instability of investment The multiplier / accelerator interaction Fluctuations in stocks The accelerator – –changes in national income and induced investment – –the accelerator coefficient – –the instability of investment The multiplier / accelerator interaction Fluctuations in stocks

KEYNESIAN ANALYSIS OF THE BUSINESS CYCLE Analysing the phases of the business cycle – –causes of the upturn – –causes of the expansion – –causes of the peaking out – –causes of the recession Conclusions – –why do booms and recessions persist? – –why do booms and recessions come to an end? Analysing the phases of the business cycle – –causes of the upturn – –causes of the expansion – –causes of the peaking out – –causes of the recession Conclusions – –why do booms and recessions persist? – –why do booms and recessions come to an end?