Warm-up: Get a EOCT Coach book

1
Warm-up Get a EOCT Coach book

• Add to Vocab
• 61.Stagflation
• What does GDP stand for?
• What do we use to measure inflation?

2
Begin Unit 3 Macroeconomics

• SSEMA1
• b. Define Gross Domestic Product (GDP), economic
  growth, unemployment, Consumer Price Index (CPI),
  inflation, stagflation, and aggregate supply and
  aggregate demand.
• c. Explain how economic growth, inflation, and
  unemployment are calculated.

3
N.B. 25- Economic Indicators

• Add the new vocab words to your list
• Read and take 2-column notes on Lesson 9
  (pp.72-77) of the EOCT Coach
• Be sure to answer the following questions in your
  notes
• How are GDP, the CPI, and the unemployment rate
  calculated?
• What are the characteristics of the four types of
  unemployment?

4
Economic Indicators
5
The story of Peorgia

• Work with a partner who has the same numbered
  handout as you do.
• Calculate all the economic indicators for Peorgia
• We will work with this more soon!

6
Quiz Time!!!!!!!!
7
Question 1What type of unemployment?

• Construction workers are laid off for the winter,
  but plan to return to work when the weather is
  better.

8
Question 2What type of unemployment?

• Workers are laid off at a Pog factory. A
  downturn in the economy has lowered demand for
  luxury items.

9
Question 3What type of unemployment?

• The United States has lost manufacturing jobs as
  a result of a change to a service-oriented
  economy.

10
Question 4What type of unemployment?

• A fast-food worker graduates from college and
  quits his job to look for a better career.

11
Question 5

• True or False?
• Unemployment in the U. S. has recently been
  higher than 8 percent.

12
Quiz!!

1. In your own words, describe what GDP attempts to
   measure.
2. Explain the formula for calculating GDP.

13
Naked Econ

• Read from the bottom of p. 177-the top of p. 181
• Why do dollars have value?
• What is the best way to think about inflation?
• What does it mean if I receive 5 interest in an
  investment while the inflation rate is 3?

14
MACROECONOMIC GOALS
LOW UNEMPLOYMENT LOW INFLATION STABILITY GROWTH
15
ECONOMIC GROWTH
Defined by sustained increases in GDP adjusted
for inflation
16
The Business Cycle

• The ups and downs of the economic activity
• The good times and bad times

17
The Business Cycle

• 4 phases

• Expansion- increasing GDP and growth
• Peak- the top of the expansionary period
• Contraction- decreasing GDP
• Trough- the bottom of the contraction

18
The Business Cycle

• Peak

contraction
Expansion
Trough
19
The Business Cycle

• Recession
• Decline in real GDP for 6 months

20
The Business Cycle

• Recession
• Worst in 1929-1933 (33 decline in GDP)
• 10 in US since 1945

21
The Business Cycle

• Be sure to label all points on the B. C. graph
• During which phase is production increasing?
• During which period is unemployment likely to be
  lowest? Why?

22
The Business Cycle

• As an economy moves from recession to expansion,
  what is likely to happen to
• Wages?
• Investments?
• Employment?
• Profits?

Peak
Trough
23
Overview

• Aggregate Supply and Demand
• Supply and Demand at the MACRO level

24
Aggregate Supply

• The amount of GDP an economy will produce
  at each and every price level
• 
  

25
Aggregate Supply

• AS
• 
  

Price level
Output
26
Aggregate Demand

• Amount of GDP that will be demanded at
  different price levels
• 
  

27
Aggregate Demand

• P
• AD
• O

Price level
Output
28
Aggregate Supply and Demand

• AS
• P
• AD
• O

Price level
Equilibrium!
Output
29

• Key learning When aggregate demand is equal to
  aggregate supply at a level that just employs all
  available productive resources with no change in
  price level, the economy is at full-employment,
  non-inflationary equilibrium

30

• Aggregate Supply Determinants
• Cost of inputs (ex.the cost of oil falls!)
• Productivity (ex. we get better computers!)
• Government regulations (ex. We have to spend
  money to clean up pollution!)

31
Aggregate Supply ShiftersChange in cost of
inputs (domestic or imported)Change in
productivityGovernment regulations

• AS1
  AS2
• 
  

Price level
Output
32

• Aggregate Demand Determinants
• Consumer Spending
• Investment Spending
• Government Spending

33
Aggregate Demand ShiftersChange in Consumer
SpendingChange in Investment SpendingChange in
Government Spending

• P
• AD1
  AD2
• O

Price level
Output
34
Aggregate Supply and Demand and the Business Cycle

• Complete the chart on your paper
• For AD and AS, predict if there will be an
  increase, a decrease, or no change.
• Also, state if the curve will shift to the right
  or to the left.

35
Aggregate Supply and Demand and the Business Cycle

• We can try to stimulate the economy by
  manipulating the AD and AS curves.

36
When AD is below full-employment production falls
and unemployment results

• AS
• P
• AD
• O

Price level
Output
37
Aggregate Supply and Demand

• AS
• P
• AD
• O

Price level
Output
Unemployment!!
38
Aggregate Supply and Demand

• AS
• P
• AD
• O

Price level
Equilibrium!
Output
39
Aggregate Supply and Demand and the Business Cycle

• We want to move the curves back to the
  full-employment non-inflationary equilibrium!

40
How Can We Shift the Curves and Help (Hopefully)
the Economy?

• Two Tools
• Fiscal Policy
• Monetary Policy

41
Expansionary Policy Increases Demand

• AS
• P
• AD
• O O2

Price level
Output
42
Warning!!!

• Demand-Pull Inflation Rise in the price level
  when agg. Demand exceeds agg. Supply.

43
Demand-Pull Inflation

• AS
• P2
• P
  AD2
• AD
• O O2

Price level
Output
44
Warning!!!

• Cost-Push Inflation Rise in the price level due
  to increase in costs of production (shifts
  agg.supply curve left).

45
Cost-Push Inflation

• AS2
• AS
• P2
• P
• AD
• O2 O

Price level
Equilibrium!
Output
46
Aggregate Supply and Demand

• AS
• P
• AD
• O

Price level
Equilibrium!
Output