1. Lectures in Macroeconomics- Charles W. Upton Some Simple Applications

2. Labor Supply and Demand D S SR S LR H* w*

3. Some Simple Applications Summary

4. Some Simple Applications A Recession D’ S SR S LR D H’H* w* w’

5. Some Simple Applications A Recession D’ S SR S LR D H’H* w* w’ People know there is a temporary decline in GDP.

6. Some Simple Applications A Recession D’ S SR S LR D H’H* w* w’ Wage rate down, hours down.

7. Some Simple Applications A War There is a sharp, temporary increase in defense spending, paid for by additional taxes.

8. Some Simple Applications A War There is a sharp, temporary increase in defense spending, paid for by additional taxes. Consumers know the taxes will not last forever. Consumption goes down but only by a fraction of the tax increase.

9. Some Simple Applications A War There is a sharp, temporary increase in defense spending, paid for by additional taxes. Consumers know the taxes will not last forever. Consumption goes down but only by a fraction of the tax increase. Demand for workers goes up.

10. Some Simple Applications A War D’ S SR S LR D H* H’ w* w’

11. Some Simple Applications A War D’ S SR S LR D H* H’ w* w’ People know the increase in military spending will not last forever

12. Some Simple Applications A War D’ S SR S LR D H* H’ w* w’ Wages up, hours of work up

13. Some Simple Applications A Drought This drought will not last forever, but there is a reduction in the demand for laborers.

14. Some Simple Applications A Drought D’ S SR S LR D H’H* w* w’

15. Some Simple Applications A Drought D’ S SR S LR D H’H* w* w’ People know there is a temporary decline in GDP.

16. Some Simple Applications A Drought D’ S SR S LR D H’H* w* w’ Wage rate down, hours down.

17. Some Simple Applications New Technology D’ S SR S LR D H*H’ w* w’ A permanent increase

18. Some Simple Applications New Technology D’ S SR S LR D H*H’ w* w’ A permanent increase People work fewer hours, but get a higher wage rate

19. Some Simple Applications New Technology D’ S SR S LR D H* H’ w* w’ A temporary increase People make more, and work harder

20. Some Simple Applications Any Temporary Increase in Government Spending We want to spend money to get us out of a recession.

21. Some Simple Applications Any Temporary Increase in Government Spending We want to spend money to get us out of a recession. The government pays for the additional spending by borrowing.

22. Some Simple Applications Any Temporary Increase in Government Spending We want to spend money to get us out of a recession. The government pays for the additional spending by borrowing. Lets ignore the impact the borrowing has on consumption.

23. Some Simple Applications A Temporary Increase in Government Spending D’ S SR S LR D H* H’ w* w’

24. Some Simple Applications A Permanent Increase in Government Spending The government decides to spend on a new program, which will continue for a long time. It raises taxes to cover the cost. The reduction in consumption demand will offset the increase in government spending.

25. Some Simple Applications A Permanent Increase in Government Spending D S SR S LR H* w*

26. Some Simple Applications A Permanent Increase in Government Spending D S SR S LR H* w* No net effect

27. Some Simple Applications End ©2004 Charles W. Upton. All rights reserved