Macro 17
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This document provides a summary of topics covered in Macroeconomics Lecture 17, including chapters 10-15. It reviews key concepts like stock markets, unemployment rates, inflation, aggregate demand and supply models, and the roles of central banks. Specific topics mentioned include indexes, types of businesses, raising money, financial statements, valuation, unemployment types, the quantity theory of money, short-run and long-run aggregate supply curves, and monetary policy tools.
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Macro 17
- 3. Exam 2 Review Chapters 10-15 Multiple Choice Short Answer Graph
- 5. Chapter 10 Stock Market and Personal Finance
- 10. Dividends portion of profits paid to shareholders
- 11. Raising Money Retained Earnings Sell Ownership Shares Borrow
- 13. Valuation Stock Price x Number of Shares $50 a share 1,000,000 shares $50,000,000 value
- 14. Foundation Finance Formula (1 + r ) n r = risk rate n = time periods
- 15. FutureValue? Future Value = Amount Today x Factor Factor is the Growth Formula (1 + r ) n r = rate n = time periods
- 16. PresentValue? Present Value = Future Amount ÷ Factor Present Value = $100 ÷ 1.61 $62.11 = $100 ÷ 1.61 Present Value is discounting Present Value is dividing
- 17. 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
- 18. Present Future x Factor ? ÷ Factor ? Factor Formula = (1 + r ) n
- 20. 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%
- 21. Not in Labor Force Adults discouraged workers full-time student homemaker military retiree
- 22. Labor Force Adults 16+ who have jobs or are looking for jobs. Employed + Unemployed
- 23. Labor Force Participation Rate The percent of the Adult Population that is in the Labor Force
- 24. 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Year 0N 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Year 0 20 40 60 Shareofthecivilianlaborforce(%) Men Women
- 25. Employed paid employees work in own business unpaid workers in family business full-time and part-time jobs but temporary absence
- 26. Unemployed not employed available tried to find a job in the last four weeks waiting to be recalled from layoff
- 28. Problems Overstate - Above actual Cash workers Understate - Below actual Discouraged workers
- 29. Natural Rate of Unemployment The normal rate of unemployment around which the unemployment rate fluctuates
- 30. Population 100 Rate Less that 16 18 Adults Not in Labor Force 23 Labor Force 72% Employed 50 Unemployed 15% 82 59 9 59/82 9/59
- 31. # % Employed Unemployed Total Labor Force 100%
- 33. Frictional Unemployment Time to find a new job
- 35. 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. Chapter 12 Inflation and the Quantity Theory of Money
- 40. Individual Price Supply and Demand Price Level - All Prices Inflation
- 43. What is Money? Medium of Exchange Store ofValue Unit of Account
- 45. Inflation Cause: Printing money faster than making goods and services Effect: Rising prices
- 46. Nominal vs. Real
- 47. P2 - P1 P1 x 100 Inflation Rate
- 50. Quantity Theory of Money M = Money Supply v = velocity P = Price Level YR = Real GDP
- 51. Mv = PYR Assume v andYR are constant M = P
- 52. M = P Inflation is everywhere and always a monetary phenomenon - Milton Friedman
- 53. Costs of Inflation uncertainty illusion redistribution tax bracket creep
- 54. Chapter 13 Aggregate Demand and Aggregate Supply
- 56. Mv = PYR Rates M + v = P +YR
- 57. Aggregate Supply Curve Two Curves Short Run Long Run
- 58. Two Supply Curves Short Run Long Run
- 59. Short Run Adrenaline Give 110% Push to exceed normal capacity
- 60. Long Run Run out of Adrenaline Fall back to normal Cannot do 110% forever unless.....
- 61. Long Run Supply Curve New Capital Human Physical Intellectual Financial Cultural
- 62. Price Level Quantity of Output Two Supply Curves Short-Run Aggregate Supply Long-Run Aggregate Supply Price change does not affect the quantity of goods and services P
- 63. New Capital Human Physical Intellectual Financial Cultural Price Level Quantity of Output Two Supply Curves LRAS1 Y1 LRAS2 Y3 LRAS3 Y3
- 64. New Capital Human Physical Intellectual Financial Cultural Price Level Quantity of Output Two Supply Curves LRAS1 Y1 LRAS2 Y3 LRAS3 Y3 P1 P2 P3
- 65. AD Real GDP Growth Rate Price Level AS Adam Smith Classical Model
- 66. AD 100 Price Level AS Adam Smith Classical Model Recession Unemployment Real GDP $6.50 $4.00 50
- 67. 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.
- 68. AD Price Level LRAS Adam Smith Neo-Classical Model Real GDP SRAS John Keynes
- 69. 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
- 70. Transmission and Amplifications Intertemporal Substitution Uncertainty and Irreversible Investments Labor Adjustment Costs Time Bunching Collateral Damage
- 71. Chapter 15 Central Banks Money Supplies Fractional Reserve Banking Reserve Ratio - Money Multiplier Monetary Tools Systemic Risks Control AD-AS Model
- 72. Who is the chairman of the central bank in your country?
- 73. AD Real GDP Growth Rate Inflation Rate π LRAS SRAS Recession Inflation
- 74. 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
- 75. Federal Reserve Bank - FED Money Supply U.S. Treasury Banks Payment System
- 78. Reserve Ratio Fractional Reserve Banking Money Multiplier
- 79. Reserve Ratio Fraction of deposits that must be held in reserve
- 80. Discount Rate Rate the FED charges member banks
- 81. Open Market Operations Buying and Selling Financial Instruments
- 82. Excess Reserves Interest If the rate is high enough you will leave it in the bank. Sets a floor
- 83. 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