Macro 11

2. Macroeconomics Winter 2020

3. Quiz 6 Name___ Sec__
1. Lawrence Peck Lecture: Name one of the two
Scriptures used in his talk.
2. Dr.Akina Lecture: Name one of the 5
leadership principles he outlined.

5. The Two Problems of
Macroeconomics

6. The Two Problems of
Macroeconomics
Unemployment

7. The Two Problems of
Macroeconomics
Unemployment
Inflation

8. Costs of Inflation

9. Costs of Inflation
uncertainty

10. Costs of Inflation
uncertainty
illusion

11. Costs of Inflation
uncertainty
illusion
redistribution

12. Costs of Inflation
uncertainty
illusion
redistribution
tax bracket creep

13. Redistribution

14. Redistribution
public to government

15. Redistribution
public to government
lenders to borrowers

16. Redistribution
public to government
lenders to borrowers

17. Redistribution

18. Redistribution
nominal = real + inflation

19. Redistribution
nominal = real + inflation

20. Redistribution
nominal = real + inflation
real can be negative

22. Aggregate Demand

23. Aggregate Demand
Aggregate Supply

24. Aggregate Demand
Aggregate Supply
Model

25. Aggregate Demand
Aggregate Supply
Model
AD-AS Model

27. AD-AS Model

28. AD-AS Model
and

29. AD-AS Model
and
Mv = PYR

35. Classical Model

36. Adam Smith
Classical Model

37. Adam Smith
Classical Model

38. Adam Smith
Classical Model

39. Price
Level
Adam Smith
Classical Model

40. Real GDP Growth Rate
Price
Level
Adam Smith
Classical Model

41. Real GDP Growth Rate
Price
Level
AS
Adam Smith
Classical Model

42. AD
Real GDP Growth Rate
Price
Level
AS
Adam Smith
Classical Model

43. AD
Real GDP Growth Rate
Price
Level
AS
Adam Smith
Classical Model

44. AD
Real GDP Growth Rate
Price
Level
AS
Adam Smith
Classical Model

45. AD
Real GDP Growth Rate
Price
Level
AS
Adam Smith
Classical Model

46. AD
Real GDP Growth Rate
Price
Level
AS
Adam Smith
Classical Model

47. AD
Real GDP Growth Rate
Price
Level
AS
Adam Smith
Classical Model

48. AD
Real GDP Growth Rate
Price
Level
AS
Adam Smith
Classical Model

49. AD
Real GDP Growth Rate
Price
Level
AS
Adam Smith
Classical Model

50. AD
100
Price
Level
AS
Adam Smith
Classical Model
Real GDP
$6.50

51. AD
100
Price
Level
AS
Adam Smith
Classical Model
Real GDP
$6.50

52. AD
100
Price
Level
AS
Adam Smith
Classical Model
Real GDP
$6.50

53. AD
100
Price
Level
AS
Adam Smith
Classical Model
Real GDP
$6.50
$4.00

54. AD
100
Price
Level
AS
Adam Smith
Classical Model
Real GDP
$6.50
$4.00

55. AD
100
Price
Level
AS
Adam Smith
Classical Model
Real GDP
$6.50
$4.00

56. AD
100
Price
Level
AS
Adam Smith
Classical Model
Real GDP
$6.50
$4.00

57. AD
100
Price
Level
AS
Adam Smith
Classical Model
Real GDP
$6.50
$4.00

58. AD
100
Price
Level
AS
Adam Smith
Classical Model
Real GDP
$6.50
$4.00
50

59. AD
100
Price
Level
AS
Adam Smith
Classical Model
Real GDP
$6.50
$4.00
50

60. AD
100
Price
Level
AS
Adam Smith
Classical Model
Recession
Unemployment
Real GDP
$6.50
$4.00
50

62. Supply

63. Supply

64. Supply
No matter the price
you can only produce
so much

66. Supply

67. Supply

68. Supply
a function of all of
your capitals

70. Mv = PYR

71. Mv = PYR
Rates of change

72. Mv = PYR
Rates of change
M + v = P +YR

73. 0
1
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14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

74. 0
1
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5
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7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Inflation
Rate
%
Price Level
P or π

75. 0
1
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8
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10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
P or π

76. 0
1
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12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
P or π
Supply is a function
of
your Capitals

77. 0
1
2
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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
Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
P or π
Supply is a function
of
your Capitals
Human Beings

78. 0
1
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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
Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
P or π
Supply is a function
of
your Capitals
Human Beings
Ideas

79. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
P or π
Supply is a function
of
your Capitals
Human Beings
Ideas
Physical

80. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
P or π
Supply is a function
of
your Capitals
Human Beings
Ideas
Physical
Human

81. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
P or π
Supply is a function
of
your Capitals
Human Beings
Ideas
Physical
Human
Intellectual

82. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
P or π
Supply is a function
of
your Capitals
Human Beings
Ideas
Physical
Human
Intellectual
Financial

83. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
P or π
Supply is a function
of
your Capitals
Human Beings
Ideas
Physical
Human
Intellectual
Financial
Entrepreneural

84. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
P or π
Supply is a function
of
your Capitals
Human Beings
Ideas
Physical
Human
Intellectual
Financial
Entrepreneural
Markets

85. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
P or π
Supply is a function
of
your Capitals
Human Beings
Ideas
Physical
Human
Intellectual
Financial
Entrepreneural
Markets
Cultural

86. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
P or π
Long-Run Supply Curve Supply is a function
of
your Capitals
Human Beings
Ideas
Physical
Human
Intellectual
Financial
Entrepreneural
Markets
Cultural

87. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
P or π
Long-Run Supply Curve Supply is a function
of
your Capitals
Human Beings
Ideas
Physical
Human
Intellectual
Financial
Entrepreneural
Markets
Cultural

88. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
P or π
Long-Run Supply Curve Supply is a function
of
your Capitals
Human Beings
Ideas
Physical
Human
Intellectual
Financial
Entrepreneural
Markets
Cultural

90. Aggregate Demand

91. Aggregate Demand

92. Aggregate Demand
Money xVelocity

93. Aggregate Demand
Money xVelocity
one or both

94. Aggregate Demand
Money xVelocity
one or both

96. Total Spending

97. Total Spending

98. Total Spending
Prices x Output

99. Total Spending
Prices x Output
one or both

100. Total Spending
Prices x Output
one or both

102. Total Spending

103. Total Spending

104. Total Spending
12% increase

105. Total Spending
12% increase
Where does in come from?

106. Total Spending
12% increase
Where does in come from?
Either more output Y or more
inflation P combination of or both.

107. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π

108. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π
Total Spending = 12%
%∆P + %∆Y
Change in Prices + Change in Output

109. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π
Total Spending = 12%
%∆P + %∆Y
Change in Prices + Change in Output

110. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π
Total Spending = 12%
%∆P + %∆Y
Change in Prices + Change in Output

111. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π
Total Spending = 12%
%∆P + %∆Y
Change in Prices + Change in Output

112. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π
Total Spending = 12%
%∆P + %∆Y
Change in Prices + Change in Output

113. 0
1
2
3
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5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π
AD12%
Total Spending = 12%
%∆P + %∆Y
Change in Prices + Change in Output

114. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π
AD12%
Total Spending = 12%
%∆P + %∆Y
Change in Prices + Change in Output
Total Spending = 8%

115. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π
AD12%
Total Spending = 12%
%∆P + %∆Y
Change in Prices + Change in Output
Total Spending = 8%

116. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π
AD12%
Total Spending = 12%
%∆P + %∆Y
Change in Prices + Change in Output
AD8%
Total Spending = 8%

117. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π
AD12%
Total Spending = 12%
%∆P + %∆Y
Change in Prices + Change in Output
Total Spending = 8%

118. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π
AD12%

119. 0
1
2
3
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5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π
Long-Run Supply Curve
AD12%

120. 0
1
2
3
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5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π
Long-Run Supply Curve
AD12%

121. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π
Long-Run Supply Curve
AD12%

122. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π
Long-Run Supply Curve
AD12%

123. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π
Long-Run Supply Curve
AD12%
8% Inflation
4% Growth
12% Total Spending

125. Quiz

126. Quiz
Money is growing at 8 percent

127. Quiz
Money is growing at 8 percent
Output is growing at 3 percent

128. Quiz
Money is growing at 8 percent
Output is growing at 3 percent
What is inflation?

129. Quiz
Money is growing at 8 percent
Output is growing at 3 percent
What is inflation?
Graph AD and Long Run Aggregate Supply

130. 0
1
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9
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11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π

131. 0
1
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5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π
Money is growing at 8 percent
Output is growing at 3 percent
What is inflation?

132. 0
1
2
3
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5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π
Money is growing at 8 percent
Output is growing at 3 percent
What is inflation?

133. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π
Money is growing at 8 percent
Output is growing at 3 percent
What is inflation?

134. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π
Money is growing at 8 percent
Output is growing at 3 percent
What is inflation?

135. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π
AD8%
Money is growing at 8 percent
Output is growing at 3 percent
What is inflation?

136. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π
AD8%
Money is growing at 8 percent
Output is growing at 3 percent
What is inflation?

137. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π
Long-Run Supply Curve
AD8%
Money is growing at 8 percent
Output is growing at 3 percent
What is inflation?

138. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π
Long-Run Supply Curve
AD8%
Money is growing at 8 percent
Output is growing at 3 percent
What is inflation?

139. 0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π
Long-Run Supply Curve
AD8%
Money is growing at 8 percent
Output is growing at 3 percent
What is inflation?

140. 0
1
2
3
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5
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7
8
9
10
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12
13
14
15
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
%∆Y = Real GDP Growth Rate %
Inflation
Rate
%
Price Level
%∆P or π
Long-Run Supply Curve
AD8%
5% Inflation
3% Growth
8% Total Spending
Money is growing at 8 percent
Output is growing at 3 percent
What is inflation?

141. Father of
Macroeconomics
John Maynard Keynes
(1883 - 1946)
The GeneralTheory of
Employment,
Interest and Money
The ideas of economists and
political philosophers are more
powerful than commonly
understood; indeed the world is
ruled by little else.