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Macroeconomics: Introduction

Macroeconomics: Introduction. Xu Hu Texas A&M University. Outline. Problems macroeconomists are interested in. ( Very Brief ) Modeling Concerns ( no slide ) Approach for this course( no slide ). 9/11/2001. First oil price shock. Great Depression. Second oil price shock. World War II.

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Macroeconomics: Introduction

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  1. Macroeconomics:Introduction Xu Hu Texas A&M University

  2. Outline • Problems macroeconomists are interested in. (Very Brief) • Modeling Concerns (no slide) • Approach for this course(no slide)

  3. 9/11/2001 First oil price shock Great Depression Second oil price shock World War II Important issues in macroeconomics U.S. Real GDP per capita (2000 dollars) • Business Cycles & Industrial Fluctuations long-run upward trend…

  4. Business Cycles & Industrial Fluctuations • What are the causes of Boom and Bust? Real Business Cycles theory Excessive Credit Type theory – e.g. Austrian School …… 2. What is the government’s role in the recessions? Fiscal Policy: Tax and Subsidy …… Monetary Policy: Fed cut the interest rate ? ……

  5. Business Cycles & Industrial Fluctuations Great Depression Fluctuations of the whole economy are sometimes accompanied with “boom and bust “ in the Financial Market

  6. Recent Crisis Dow Jones Industrial Ave S&P 500 Unemployment Rate

  7. U.S. inflation rate(% per year) • Inflation Prior to the Great Depression, the inflation rate was fairly low.

  8. Inflation • What do high inflation rates mean to the public?- “The cost of inflation” • Inflation and Monetary Policy

  9. German Hyperinflation 1919-1923. Germany, 1923: banknotes had lost so much value that they were used as wallpaper. Source: wiki

  10. U.S. unemployment rate(% of labor force) • Unemployment : Voluntary and Involuntary

  11. Economic Growth 1.What are the factors which influence the speed of economic growth ? 2. How to explain the “gap” between developing countries and developed countries?

  12. Among themselves, macroeconomists often do not have consensuses on certain issues, even some important issues. • Here is an interesting example.

  13. Crude Oil prices : Fundamentals V.S. Speculation

  14. Debate between two economists • Paul Krugman : The Oil Non-bubble(May 12, 2008) • Guillermo Calvo : Exploding commodity prices, lax monetary policy, and sovereign wealth funds(June 20, 2008) • Paul Krugman:Calvo on Commodities (June 21, 2008)

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