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Macroeconomics 3/14/2016

by: amber weiss

Macroeconomics 3/14/2016 Economics 111

amber weiss
GPA 3.7

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About this Document

This is what we covered in class Wednesday March 16, 2016
Mary Anne Pettit
Class Notes
25 ?




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This 2 page Class Notes was uploaded by amber weiss on Monday March 21, 2016. The Class Notes belongs to Economics 111 at Southern Illinois University Edwardsville taught by Mary Anne Pettit in Spring 2016. Since its upload, it has received 8 views. For similar materials see Macroeconomics in Economcs at Southern Illinois University Edwardsville.


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Date Created: 03/21/16
Macroeconomics March 16, 2016  Good growth rate: 2-5%  Long run trend: 3%  GDP defines recession  Recession: standard rule of thumb is 2 consecutive quarters of falling real GDP  QUIZ: Does this data indicate a recession?  Quarter 1: 2.5%  Quarter 2: 2%  Quarter 3: 1.5%  Quarter 4: 1%  NO! It doesn’t meet the definition, it is positive and indicating growth, it is slow but it grows. In order for it to be negative there would have to be a negative sign in front of the data.  When real GDP falls the growth rate will be negative  To be negative, it would need a negative sign  So, 2 quarters of negative GDP growth  Selected “official” recessions: 1990, 2001, 2007 - 2007- ended in 2009- most recent  Longest expansion in history! 1991- 2001 - Expansion- all quarters of positive economic growth  Calculating GDP - GDP- Measures total market value of all final goods/output - GDP exclusions: 1. Purely financial transactions  Government transfer payment such as Social Security Payments  NO NEW OUTPUTS PRODUCED  Security transactions such as buying and selling stocks and bonds  Stock represents ownership 2. Secondhand sales  Cars, houses, clothes, etc… - To calculate GDP, use Expenditure Method  Expenditure method- add up all of major components or types of spending  GDP= C + I + G (Xg – M ) - Each letter is a type of spending - C = consumer spending  Spending by households - I= investment spending  NOT BUYING STOCKS AND BONDS – BECAUSE NOT INCLUDED DUE OT EXCLUSION  Spending by businesses (mostly*) 1) New capital: new tools, equipment, machinery, factories 2) Residential investment – buying a NEW home 3) Changes in inventory – stuff produced that year on shelves and in warehouses, (even if not sold) - G= government spending  Spending by all levels of government local government, local and federal government  Excludes transfer payments – same as purely financial transactions Example) Social Security  New things: Bridges, computers, airplanes is all money the government spends - The rest of this equation will be completed on Friday, March 18th


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