AGRICULTURAL ECONOMICS

1. Macroeconomic Policy and Agriculture Chapter 15

2. Page 306 Macro trends contributing to the farm financial crisis in the early-1980s

3. Page 307 Drop in real net farm income and higher real interest rates led to declines in farm land values

4. Page 308 As real net farm incomes declined and real interest rates rose, investment expenditures fell sharply. Outlays for operating inputs also declined. General economy was in much better shape …

5. Recall the policy impacts on the general economy

6. Page 294 This table summarizes the impacts that expansionary and contractionary monetary and fiscal policy have upon key variables that can have a distinct effect on the financial health of farm operator families.

7. A I Effects of Expansionary Monetary Policy Interest rates fall

8. A I Effects of Expansionary Monetary Policy Interest rates fall Investment grows

9. A I Effects of Expansionary Monetary Policy Interest rates fall Investment grows Gap closes with some inflation

10. Page 294 This table summarizes the impacts that expansionary and contractionary monetary and fiscal policy have upon key variables that can have a distinct effect on the financial health of farm operator families.

11. Effects of Contractionary Monetary Policy Interest rates rise

12. Effects of Contractionary Monetary Policy Interest rates rise Investment falls

13. Effects of Contractionary Monetary Policy Interest rates rise Investment falls Gap closes with less inflation

14. Page 292 This table summarizes the impacts that expansionary and contractionary monetary and fiscal policy have upon key variables that can have a distinct effect on the financial health of farm operator families.

15. Effects of Expansionary Fiscal Policy Taxes cut Deficit rises

16. Effects of Expansionary Fiscal Policy Taxes cut Deficit rises Consumption rises

17. Effects of Expansionary Fiscal Policy Taxes cut Deficit rises Consumption rises Gap closes with more inflation

18. Effects of Expansionary Fiscal Policy Spending raised Deficit rises

19. Effects of Expansionary Fiscal Policy Spending raised Deficit rises Gap closes with more inflation

20. Page 292 This table summarizes the impacts that expansionary and contractionary monetary and fiscal policy have upon key variables that can have a distinct effect on the financial health of farm operator families.

21. Effects of Contractionary Fiscal Policy Taxes raised Deficit falls

22. Effects of Contractionary Fiscal Policy Taxes raised Deficit falls Consumption falls

23. Effects of Contractionary Fiscal Policy Taxes raised Deficit falls Consumption falls Gap closes with less inflation

24. Effects of Contractionary Fiscal Policy Spending cut Deficit falls

25. Effects of Contractionary Fiscal Policy Spending cut Deficit falls Gap closes with less inflation

26. Let’s look at policy impacts on the Ag sector

27. Macro AD AS CPI GDP Macro to Micro Linkages for Agriculture Equilibrium in the national product market

28. Macro Market AD AS CPI GDP P CORN Q CORN D S Macro to Micro Linkages for Agriculture Equilibrium in the national product market Equilibrium in the national corn market

29. Macro Market Micro AD AS CPI GDP P CORN Q CORN $ Output D S MC Macro to Micro Linkages for Agriculture Equilibrium in the national product market Equilibrium in the national corn market Equilibrium for Gary Corngrower in Texas q corn

30. Page 294

31. Macro Market Micro AD AS CPI GDP P CORN Q CORN $ Output D S Impact of Expansionary Macro Policy Equilibrium in the national product market Equilibrium in the national corn market Equilibrium for Gary Corngrower in Texas q corn MC

33. Page 294

34. Macro Market Micro AD AS CPI GDP P CORN Q CORN $ Output D S Impact of Contractionary Macro Policy Equilibrium in the national product market Equilibrium in the national corn market Equilibrium for Gary Corngrower in Texas q corn MC

36. Page 294

37. Macro Market Micro AD AS CPI GDP P CORN Q CORN $ Output D S Impact of Expansionary Macro Policy Equilibrium in the national product market Equilibrium in the national corn market Equilibrium for Gary Corngrower in Texas q corn MC

39. Page 294

40. Macro Market Micro AD AS CPI GDP P CORN Q CORN $ Output D S MC Impact of Contractionary Macro Policy Equilibrium in the national product market Equilibrium in the national corn market Equilibrium for Gary Corngrower in Texas q corn

42. Impacts on economic well being

43. Price Quantity Consumer surplus Producer surplus Measuring Economic Well-Being 1 2

44. Macro Market Micro AD AS CPI GDP P CORN Q CORN $ Output D S MC What Can We Say About Gary’s Business? Equilibrium in the national product market Equilibrium in the national corn market Equilibrium for Gary Corngrower in Texas q corn ATC

45. Macro Market Micro AD AS CPI GDP P CORN Q CORN $ Output D S MC Equilibrium in the national product market Equilibrium in the national corn market Equilibrium for Gary Corngrower in Texas q corn What Can We Say About Gary’s Business? ATC

46. Price Quantity Measuring Economic Well-Being 1 2 3 5 4 Consumer surplus? Before = 1+2 After = 1+5 Gain = 5 – 2 Producer surplus? Before = 3 After = 2+3+4 Gain = 2+4

47. Macro Market Micro AD AS CPI GDP P CORN Q CORN $ Output D S MC What Can We Say About Gary’s Business? Equilibrium in the national product market Equilibrium in the national corn market Equilibrium for Gary Corngrower in Texas q corn ATC

48. Macro Market Micro AD AS CPI GDP P CORN Q CORN $ Output D S Impact of Contractionary Macro Policy Equilibrium in the national product market Equilibrium in the national corn market Equilibrium for Gary Corngrower in Texas q corn MC

49. Price Quantity Measuring Economic Well-Being 1 2 3 5 4 Consumer surplus? Before = 1+5 After = 1+2 Loss = 2 – 5 Producer surplus? Before = 2+3+4 After = 3 Loss = 2+4

51. Chapter 16 begins our focus on international trade ….