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Class11 Class11 Presentation Transcript

  • Jeffrey TimmermansGlobal Financial JournalismWeek 12: Wrap-up & Intro to Economic JournalismThursday, 2 May, 13
  • What is economics?Thursday, 2 May, 13
  • One answer:“Economics is a study of mankindin the ordinary business of life.”- Alfred Marshall, Principals of EconomicsThursday, 2 May, 13
  • Another answer...✤ The study of how people deal with scarcity✤ Nothing is available in unlimited quantities✤ This requires making choices, making trade-offsThursday, 2 May, 13
  • Economic choices✤ Which product/service to choose?✤ What other products/services to forego?✤ Which choice will make us happiest?✤ Classical economists assume people make these choices rationally✤ People will act to maximize their well-being✤ But aren’t always rational (according to behavioral economists)Thursday, 2 May, 13
  • Factors that affect those choices✤ Supply & Demand (markets)✤ Incentives (from businesses & governments)Thursday, 2 May, 13
  • Incentives✤ People’s choices are affected by incentives✤ “Half-price!”, “Three for the price of two!”✤ Smoking indoors – or cursing – could result in a fine✤ Incentives don’t have to be monetary✤ Wearing a helmet when riding a motorcycle✤ Reduces the bodily “cost” of an accidentThursday, 2 May, 13
  • Incentives & their (unintended)consequencesThursday, 2 May, 13
  • Traffic accident deaths024681985 1987 1989 1991 1993 1995 1997 1999Helmet lawenacted% of totalaccidentsSource: Maryland Dept. of TransportationThursday, 2 May, 13
  • Course topics✤ How economies function✤ How to measure economies✤ How governments manage economies✤ How banks function✤ Some of the major trends in economic thought✤ And, how to write about all these thingsThursday, 2 May, 13
  • Supply &Demand✤ Demand is based on thevalue consumers attach togoods & services as well astheir income & substitutegoods✤ Supply is determined bysuppliers’ costs✤ The market price is asummary of the supply &demand in the marketPriceQuantityDemandSupplyMarketPrice{NewDemandNew PriceAdd’lSuppliersThursday, 2 May, 13
  • What kind of product is this?PriceQuantityDemandSupplyMarketPriceNew PriceQ2Q1New PriceThursday, 2 May, 13
  • Types of economiesCommandEconomyFree-marketEconomyNo gov’tinterventionTotalinterventionN.KoreaSwedenU.S.HongKongThursday, 2 May, 13
  • Circular Flow ModelThursday, 2 May, 13
  • Circular Flow with SavingsThursday, 2 May, 13
  • Circular Flow with InventoryThursday, 2 May, 13
  • The Business CycleReal outputTimeTrend lineRecessionRecessionRecessionRecoveryRecoveryTroughPeakThursday, 2 May, 13
  • U.S. Economic Growth(1940-2010)Source: St. Louis Federal Reserve BankThursday, 2 May, 13
  • U.S. Business Cycle (1970-1980)Source: St. Louis Federal Reserve BankThursday, 2 May, 13
  • Why do economies grow overtime?✤ Population growth✤ Investment✤ Accumulated knowledge✤ Improved productivity✤ Better technologyThursday, 2 May, 13
  • Economic goals of governments✤ Full employment✤ or at least as full as possible...✤ Steady annual growth in output✤ without overheating✤ Stable prices (low but steady rise in inflation)Thursday, 2 May, 13
  • Measuring economic performance✤ Output of goods & services✤ Changes in prices for goods &services over time✤ Mood of consumers✤ Employment✤ Total supply of money✤ Trade with other countries✤ Productivity of workersThursday, 2 May, 13
  • Major economic indicators✤ Gross Domestic Product (GDP)✤ measures output, not wealth nor well-being✤ Consumer Price Index✤ measures how prices change (e.g. inflation)✤ Unemployment✤ Money SupplyThursday, 2 May, 13
  • The Economic/Regulatory CycleCrisis in un- or under-regulated areaPoliticians respond topeople’s angerLobbyists/companiesseek deregulationPoliticians respond tocompaniesEconomic stimulus &increased regulationFiscal/monetarytightening,deregulationRecessionGrowthThursday, 2 May, 13
  • Remember...✤ Journalists can provide perspective and context:✤ A recession isn’t the end of the world✤ A growth & recovery phase won’t go on forever✤ This time isn’t different!✤ Regulatory response isn’t always appropriate and is influenced bypolitical considerationsThursday, 2 May, 13