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Third Week and Fourth Week Notes

by: Morgan Genelin

Third Week and Fourth Week Notes ECON2020

Marketplace > University of Colorado > Economcs > ECON2020 > Third Week and Fourth Week Notes
Morgan Genelin
GPA 3.97

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January 26/28 February 2
Principles of Macroeconomics
Murat Iyugan
Class Notes
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This 3 page Class Notes was uploaded by Morgan Genelin on Monday February 22, 2016. The Class Notes belongs to ECON2020 at University of Colorado taught by Murat Iyugan in Winter 2016. Since its upload, it has received 39 views. For similar materials see Principles of Macroeconomics in Economcs at University of Colorado.


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Date Created: 02/22/16
January 26, 2016 CHAPTER 5 a) Production Possibilities Frontier within Trade a. As long as there are different opportunity costs, trade will be beneficial i. Different slopes of PPF lines b. Ricardian model i. Analyzes trade under assumption opportunity costs are constant 1. Linear lines for slopes 2. Always negative slope 3. Price between two opportunity costs c. Heckscher­Olin model: sources of comparative advantage 1. International differences in climate 2. Differences in technology 3. Differences in factor endowments a. Countries have a comparative advantage  in the products  who’s factors they have in abundance ii. Attempt to understand difference in slopes 1. Still linear but now with explanations b) Gains and Losses from Trade a. When a country imports: 1. Consumer gains 2. Producer loses ii. World price is below domestic A X Before  After Change Trade B D CS A A +b +d +b +d C PS B +c C ­b b. When a country Exports 1. Consumer loses 2. Producer Gains 3. World price is above domestic A X Before  After Change B D Trade C CS A +b  A ­b PS C C+ b+ d +b +d ii. Domestic Equal                  World January 28, 2016 c) Effects of protection a. Tariffs: tax on the good that is imported i. Limit free trade ii. Price goes above world price X Before After Change A CS ABCDFG AB ­CDFG B PS E ED +D D F C G G C +C E iii. World    Tariff b. Quota: limit on the quantity of imports i. Restricting trade ii. Gov doesn’t get the tax benefit 1. Quota holders do through “quota rent” iii. Same Graph as the tariff but the government is the license holder c. Why we have protectionism i. National security 1. Weapons, know where they come from ii. Jobs 1. Citizens are important a. Political argument 2. Infant industry policy a. Make small industries grow larger over time January 28, 2016 Chapter 6: What is Macroeconomics? How are we going to study it? a) Define stuff a. Figure out exactly what you will study b) Measure them a. Set parameters for the things you defined c) For EXAMPLE a. Business Cycles i. Peaks and troughs ii. Recessions and expansions b. Long run growth of income i. GDP c. Price measurements and inflation i. GDP deflation ii. CPI iii. PPI Business Cycle: Short Run alteration between economic downturns and upturns. ­ Depression a deep and prolonged trough or downturn ­ Recession  a downturn when output and employment are falling o Not as long as a depression ­ Expansion GDP increases ­ Contraction GDP decreases ­ Recovery Getting to GDP that was the same as before.


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