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Macro 16
- 3. Exam 2 Friday March 8 Testing Center Chapters 10-15
- 4. Chapter 10 Stock Market and Personal Finance
- 7. Dow Jones Industrial Average DJIA 30 leading companies
- 8. Investment GDP: purchases of new capital Stocks and Bonds
- 9. Firm An organization that organizes capitals
- 12. Dividends portion of profits paid to shareholders
- 13. Raising Money Retained Earnings Sell Ownership Shares Borrow
- 15. Income Statement Revenue - Expenses = Net Income What happened between two dates?
- 16. Balance Sheet What I own What is the status on a specific date? What I owe What I am worth = Assets Liabilities Net Worth Must balance
- 17. Valuation Stock Price x Number of Shares $50 a share 1,000,000 shares $50,000,000 value
- 18. Valuation Share Price: $175 Share Outstanding: 4.915 billion Value ? $856 billion
- 20. Finance Time - t or n Risk - r or i
- 21. Foundation Finance Formula (1 + r ) n r = risk rate n = time periods
- 22. Finance Unknown - Present Value or Future Value? Must know rate and number of periods Compute Factor with formula (1+r)n If FV multiply If PV divide
- 23. Present Future x Factor ? ÷ Factor ? Factor Formula = (1 + r ) n
- 25. Unemployment Rate Labor Force Participation Rate Rates are Ratios
- 26. Not in Labor Force not employed discouraged workers full-time student homemaker military retiree
- 28. Discouraged Worker People who would like to work but have given up looking for a job
- 29. Labor Force Adults 16+ who have jobs or are looking for jobs. Employed + Unemployed
- 30. Labor Force Participation Rate The percent of the Adult Population that is in the Labor Force
- 31. millions % Population % Adults % Labor Force Population 320 100% Age under 16 66 20% Age 16+ 254 80% 100% Not in Labor Force 94 30% 37% In Labor Force 160 50% 63% 100% Employed 152.3 47.6% 60% 95.2% Unemployed 7.7 2.4% 3% 4.8%
- 32. Problems Overstate - Above actual Cash workers Understate - Below actual Discouraged workers
- 34. Frictional Unemployment Time to find a new job
- 36. Structural Unemployment Too many workers Change in Demand
- 37. Minimum Wage Laws Government sets a minimum wage that can legally be paid Price Floor
- 38. $0 $5 $10 $15 $20 0 10 20 30 40 50 60 Supply Demand Wage Workers Equilibrium Wage 30 workers 30 jobs no unemployment Minimum Wage 40 workers 20 jobs 20 unemployed workers Minimum Wage 20 workers get a raise 10 workers lose job 10 new unemployed workers Minimum Wage
- 39. Efficiency Wages Higher wages make more productive employees
- 40. Efficiency Wages More Healthy Lower Turnover Higher Quality More Effort
- 41. Chapter 12 Inflation and the Quality Theory of Money
- 42. 100+ Currencies
- 45. If money loses trust It loses its value
- 46. What is Money? Medium of Exchange Store ofValue Unit of Account
- 49. Inflation Cause: Printing money faster than making goods and services Effect: Rising prices
- 50. Nominal vs. Real
- 51. P2 - P1 P1 x 100 Inflation Rate
- 54. Quantity Theory of Money M = Money Supply v = velocity P = Price Level YR = Real GDP
- 55. v = velocity The average number of times a dollar is used to purchase final goods and services within a year
- 56. Mv = PYR Assume v andYR are constant M = P
- 57. M = P Inflation is everywhere and always a monetary phenomenon - Milton Friedman
- 59. Costs of Inflation uncertainty illusion redistribution tax bracket creep
- 60. Who wins? Inflation Winners Losers Lower than Expected Lenders Borrowers Higher than Expected Borrowers Lenders
- 61. Chapter 13 Aggregate Demand and Aggregate Supply
- 62. AD Real GDP Growth Rate Price Level AS Adam Smith Classical Model
- 63. AD 100 Price Level AS Adam Smith Classical Model Recession Unemployment Real GDP $6.50 $4.00 50
- 64. 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.
- 65. AD Price Level LRAS Adam Smith Neo-Classical Model Real GDP SRAS John Keynes
- 66. AD Real GDP Growth Rate Inflation Rate π LRAS SRAS Recession Inflation
- 67. Negative Positive Shift Left Shift Right Aggregate Supply Curve Bad weather Good weather Higher oil price Lower Oil Price Tech slump Tech boom Higher business taxes or regulations Lower business taxes or regulation War, Earthquake, Pandemic Smooth production Aggregate Demand Curve Slower Money Supply Growth Faster money Supply Growth Fear Confidence Reduced Wealth Increased Wealth Higher Personal Taxes Lower Personal Taxes Lower Government Spending Higher Government Spending Decreased Export Growth Increased Export Growth Increased Import Growth Decreased Import Growth
- 69. Graphing Quiz Total Spending Growth Rate is 12% Inflation Rate is 8% Growth Rate? Reduce Money Growth Rate to 4% Graph the Process Explain
- 70. 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 Real GDP Growth Rate Inflation Rate Total Spending Rate = Inflation Rate + Real GDP Growth Rate
- 71. 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 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
- 72. Mv = PYR Rates M + v = P +YR
- 73. 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% -2% 0% 2% 4% 6% Aggregate Demand AD = M +V = 5%P Inflation Rate Y - Real GDP Growth Rate 5% = P +Y AD = 7%
- 74. 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% -2% 0% 2% 4% 6% Aggregate Demand P Inflation Rate Y - Real GDP Growth Rate
- 75. Short-Run Supply Curve Adrenaline Give 110% Push to exceed normal capacity
- 76. Long Run Run out of Adrenaline Fall back to normal Cannot do 110% forever unless.....
- 77. Chapter 14 Transmission and Amplification Functions
- 78. Transmission and Amplifications Intertemporal Substitution Uncertainty and Irreversible Investments Labor Adjustment Costs Time Bunching Collateral Damage
- 79. Little things can cause big things
- 80. Life is not linear Good Bad
- 81. Chapter 15 The Federal Reserve
- 83. Negative Positive Shift Left Shift Right Aggregate Supply Curve Bad weather Good weather Higher oil price Lower Oil Price Tech slump Tech boom Higher business taxes or regulations Lower business taxes or regulation War, Earthquake, Pandemic Smooth production Aggregate Demand Curve Slower Money Supply Growth Faster money Supply Growth Fear Confidence Reduced Wealth Increased Wealth Higher Personal Taxes Lower Personal Taxes Lower Government Spending Higher Government Spending Decreased Export Growth Increased Export Growth Increased Import Growth Decreased Import Growth
- 84. Chapter 15 Central Banks Money Supplies Fractional Reserve Banking Reserve Ratio - Money Multiplier Monetary Tools Systemic Risks Control AD-AS Model
- 85. AD Real GDP Growth Rate Inflation Rate π LRAS SRAS Recession Inflation
- 87. Problem Recession Shift AD to Right Inflation Shift AD to Left Tools Increase Money Supply Decrease Money Supply Reserve Ratio Lower Raise Discount Rate Lower Raise Open Market Operations Buy Bonds from the Banks Sell Bonds to the Banks Excess Reserves Interest Rate Lower Raise
- 88. Illiquid No cash Net worth to pay debt, but can’t sell quick and without loss Insolvent No cash No net worth to pay debt