Macro 12

2. Lecture 11
Macroeconomics

3. Opening
Prayer

4. Quiz Master

5. Quiz
1.What is a model?
2.What curve in the ADAS Model does the money supply
effect and how?
3.Who is the Father of Macroeconomics?
4.What are the two problems in Macroeconomics?
A simplified version of reality
Aggregate demand - Interest rates determine payment size
John Maynard Keynes
Inflation and Unemployment/Recession

6. Do lower interest rates increase sales
or raise prices?

7. Growth Rates
%∆ Total Spending ≈ %∆ P + %∆ YR

8. 0
1
2
3
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15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Real GDP Growth Rate %
Inflation
Rate
%
AD @12%
AD @8%

9. Aggregate Demand Curve Shift
Two Stages
Short Run Equilibrium
Long Run Equilibrium

10. Analytical Steps
Event
Which Curve? AD or AS
Which Direction? Left or Right
Consequence for Inflation and GDP
If AS, then one step
If AD, then two steps

11. Graphing Quiz
Total Spending Growth Rate is 12%
Inflation Rate is 8%
Growth Rate?
Reduce Money Growth Rate to 4%
Graph the Process
Explain

12. 0
1
2
3
4
5
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8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Real GDP Growth Rate %
Inflation
Rate
%
AD1
LRAS SRAS
AD2
8% Inflation
4% Growth
12% Total
Spending
7% Inflation
1% Growth
8% Total
Spending
4% Inflation
4% Growth
8% Total
Spending
Short
Run
Long
Run

13. Aggregate
Supply
Shift Left - Decreasing Demand
Slower Money Supply Growth
Fear
Reduced Wealth
Higher Personal Taxes
Lower Government Spending
Decreased Export Growth
Increased Import Growth
Shift Right - Increasing Demand
Faster Money Supply Growth
Confidence
Increased Wealth
Lower Personal Taxes
Higher Government Spending
Increased Export Growth
Decreased Import Growth
Left
Shift Left - Losing Capitals
Bad weather
Higher oil price
Tech slump
Higher business taxes or regulations
War, Earthquake, Pandemic
Shift Right - Gaining Capitals
Good weather
Lower Oil Price
Tech boom
Lower business taxes or regulation
Smooth production
Aggregate
Demand
Right