Macro 12
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This document discusses macroeconomic concepts including: - The quantity theory of money equation Mv=PY and how inflation is caused by increases in the money supply. - The costs of inflation including uncertainty, redistribution from lenders to borrowers, and tax bracket creep. - The aggregate demand-aggregate supply model and how recessions occur when aggregate demand decreases. - The ideas of classical economists like Adam Smith and keynesian economists like John Maynard Keynes about macroeconomics and unemployment. - How reducing the money growth rate can lower inflation over time by shifting aggregate demand to the left along the aggregate supply curve.
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Macro 12
- 3. Mv = PYR Assume v andYR are constant M = P
- 4. M = P Inflation is everywhere and always a monetary phenomenon - Milton Friedman
- 6. Costs of Inflation uncertainty illusion redistribution tax bracket creep
- 7. Redistribution public to government lenders to borrowers
- 8. Redistribution nominal = real + inflation real can be negative
- 10. Who wins? Inflation Winners Losers Lower than Expected Lenders Borrowers Higher than Expected Borrowers Lenders
- 11. Tax Bracket Creep 10% 20% Higher tax bracket Pay more but not earn more
- 12. Quiz What is the difference between good money and bad money?
- 13. George GilderLife After Google
- 14. What is Wealth? Knowledge What is Growth? Learning
- 15. Learning Curve Double Output Reduce Costs by 20% to 30%
- 17. 2008 2018
- 18. In an information age, economies can change as fast as minds can change
- 19. 95% of Revenue from Advertising
- 20. Selling your time and attention to advertisers
- 26. Supply No matter the price you can only produce so much
- 27. Supply a function of all of your capitals
- 28. New Capital Human Beings Ideas Human Physical Intellectual Financial Cultural Markets Entrepreneurs Innovations Price Level Quantity of Output Long-Run Supply Curve LRAS2 Y3 LRAS3 Y3 LRAS1 Y1
- 29. AD Real GDP Growth Rate Price Level AS Adam Smith Classical Model
- 30. AD 100 Price Level AS Adam Smith Classical Model Recession Unemployment Real GDP $6.50 $4.00 50
- 31. 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.
- 32. AD Price Level LRAS Adam Smith Neo-Classical Model Real GDP SRAS John Keynes
- 33. Graphing Quiz Total Spending Growth Rate is 12% Inflation Rate is 8% Growth Rate? Reduce Money Growth Rate to 4% Graph the Process Explain
- 34. 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
- 35. 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
- 36. Great Depression 1929-1940 MV = PY M = Reduced V = Reduced P = Stuck Y = Reduced
- 40. π Y Quiz ADAS Modeling Inflation Output Curve Direction Level Level 1. Good Weather 2. Slower Money Growth Rate 3. Lower Business Taxes 4. Decrease in Exports 5. New innovation 6. Lower electricity prices 7. Higher Personal Taxes 8. Earthquake
- 41. AD Real GDP Growth Rate Inflation Rate π LRAS SRAS