Modern Principles: Macroeconomics See the Invisible Hand: Understand Your World Tyler Cowen and Alex Tabarrok

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Housing Starts and Vacancies

Real GDP growth rate Inflation Rate () Solow growth curve 3% SRAS 4% The Great Recession and the Great Fall in AD -1% -3%

Growth of Shadow Banking

New Solow growth curve Old Solow growth curve New SRAS Old SRAS a b c Real shock 16% 8% -3% -1% 3% Inflation rate (π) Real GDP growth rate AD (M + v = 15%) → → AD (M + v = 5%) → → M → The Negative Real Shock Dilemma

Modern Principles: Macroeconomics See the Invisible Hand: Understand Your World Tyler Cowen and Alex Tabarrok