1. EFLATIONARY GAP M.POURHOSSEINI

2. 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

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

4. The deflationary gap O Y W W, J J YeYe

5. O Y W J YeYe YFYF The deflationary gap

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

7. 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

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

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

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

11. 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

12. 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

13. The inflationary gap O Y W W, J YeYe J

14. O Y W YeYe YFYF J The inflationary gap

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

16. 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

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

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

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

20. 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

21. Unemployment and inflation O Y Price level YFYF AS 1

22. O Y Price level YFYF AS 2 Unemployment and inflation

23. 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

24. 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

25. 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

26. 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

27. 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

28. 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

29. 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

30. 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

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

32. The accelerator effect

33. 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

34. 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

35. Fluctuations in real GDP and investment: 1978-99

36. GDP

37. Fluctuations in real GDP and investment: 1978-99 GDP Investment

38. 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

39. 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

40. 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?