Introduction to Economics
Introduction to Economics ECON 1
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ECON 1 Section 18 ShortTerm Economic Fluctuations 2 m be a as R l Section 18 Agenda Administrative Stuff 5 min Problem 263 10 min Recap Quiz 10 min Problem 244 10 min Exercise 242 10 min Recap 2 min NW 4m 2mm ECON 1755mm 1542923 651 R Esmuna g Contact Details GSI Ramon Estopina Office Hours Thursday 145300 PM Office Evans 5087 Email estopinahaasberkeleyedu Handouts only sections 104 amp 133 after class in httpwwwocfberkeleyedujaychenecon1 Please read Read before downloading Nev 4m 2EIE2 ECON 1752mm m 4292 2 as R Bf wna Administrative Stuff PS 3 ready pick up your PS Problems graded from 1 to 3 1 Some effort 2 Overall well done but some mistaks 3 Vew we done Then average the 8 questions and transform in class grades 1 r 175 1 Check minus 175 e 25 3 Check 25 r 3 5 Check plus Remember The real value in the problem sets is in preparation for the midterms and na s Nov 4m 2EIE2 ON 1752mm 5 wage 4 as R Begum Midterm Survey Results 1 Participation of 24 students 48 of population Lowest Scores Scale 1Compl Disagree 4Neural 7Compl Agree 329Encourage Name tags 469Is valued for advice not directly related to course but 11 NA 500Knows ifclass is understanding him 513Speaks audiny and at a reasonable pace 521It39s easy to understand Nov 4m 2mm ECON 1755mm 1542925 651 R Esmuna Midterm Survey Results 2 Highest Scores Scale 1Compl Disagree 4Neural 7Compl Agree 675WeIIprepared and organized for each session 650Maintain a quotsection websiteII with handouts and other information 643Make handouts available after class PDF ls 629SeIfcon dent thorough knowledge of course material 623Showed respect for all students 621Identi es what he considers important Nov 4th 2EIEI2 ECON 1752mm m 4292 a as R Bf wna l Midterm Survey Results 3 Section Structure Scale 1Less Time 4It s OK now 7More Time 450Some 35 Problems 3540 min 446Review of last sectionlectu re Important to remember 510 min 383Summary Next Class 23 min 357Administrative Stuff 23 min 354IntroductionContact DetailsAgenda 2 3 min Nay 4th 2W2 ECON 175mm m7paae7 351 R Esmuna ii Demand for Money ch 26 When will you hold money Remember MB MC gt 0 You took Micro economic classes didn t you Benefit of holding money Make transactions Value of transactions depends on rea income or output Y price level P nominal GDP PY Costs of holding money Opportunity coss nominal interest rate i Nay 4th 2W2 ECON 175mm 1542929 351 R Esmuna l Midterm Survey Comments Opportunities for improvement More problems needed More detailed explanations Section movs a bit tno fast Problems similar to Exams Good Things PowerPoint handous Class Website Organized amiable Thanks for your feedback Nay 4th 2EIE2 ECON 1 7 52mm 15 7Raae a 351 R Emma ii Problem 263 FampB page 719 How do you expect each of the following to affect the US demand for money A Competition among brokers forces down the commission charge for selling holdings of bonds or stoc Lower commission charges reduce the cost of converting nonmoney asses into money increase People will tend to hold less money knowing that it is relatively cheap to sell other asses to obtain money as nee to make transactions So the economywide demand for money declins Nay 4th 2EIE2 ECON 175mm 15 7R2 m 351 R Emma Problem 263 cont d B Grocery stores begin to accept credit cards In payment Now people can charge their groceries instead of using money cash or check But the overall effect is likely to be to reduce the amount of money people need tn hold on average over t e mon The demand for money declins cg Financial investors become concerned a out Increasmg rIskIness of stocks 1 stoc s ecome more risky people will demand relatively more safe asses money among them The emand for money rises Nay 4th 2W2 ECON 1 75mm 13 7 Page 11 351 R Esmuina gi Problem 263 cont d D Online banking allows customers to check balances and transfer funds between checking and mutual fund investments 24 hours a Mutual fund investmens are not part ofthe M1 money stnck they are part of M2 and I m not talking about BMW s here As in part a if people can conveniently and cheaply convert nonmone asses into money as needed for transactions they can get by holding less money on avera e The demand for money declins Nay 4th 2EIE2 ECON 1 7 samm 15 7R2 12 351 R Emma g Problem 263 Conclusion E The economy enters a boom period Higher income raises the volume of transactions The demand for money increases F Political instability increases in developing nations Worried about in ation or even con scation of their domestic assets citizens ofdeveloping nations may choose m hoard dollars The total demand for US money including the overseas demand rises Nay 4m 21am ECON 175mm 13 7 Page 13 cs R Esmuina g Review of Last Lecture 1030th Chapter 24 LR vs SR Fluctuations Recession amp Egtltpansion amp Business Cycle Potential Output GDP at Full Employment Causes amp costs of Gap Unemployment Cyclical Frictional Structural Okun s Law Nay 4m 2EIE2 ECON 1755mm 5 7R2 14 cs R Emma ii Important to remember Types of unemployment Frictional Shortterm matching ofjobs and workers Reflects typl39caamount of time to nd a job or fill a vacancy Structural Longterm chronic skill mismatch of unemployed and vacancies Seems to be related to health of economy Cyclical Egtlttra unemployment that occurs uring recession supply of workers gt demand jobs available Nay 4m 21am ECON 1 75mm 13 7 Page 15 cs R Esmuina 1 Important to remember 2 Okun s Law Each extra percentage point of cyclical unemployment is associated with 2 percentage point increase in output gap Indicates loss to socielyof output gap Nay 4m 2EIE2 ECON 1 7 Semen 15 7R2 1a cs R Emma Recap Quiz 1 Which of the following is an indicator of shortterm economic fluctuations 1 unemployment 2 inflation 3 sales of durable goods 4 GDP Z5 all of the above Nay 4m 21am ECON 1 75mm 13 7 Page 17 cs R Esmuina Recap Quiz 2 A positive output gap when actual output is below potential is called an 1expansionary gap ZZrecessionary gap 3depressionary gap 4contractionary gap 5inflationary gap Nay 4m 2EIE2 ECON 1 7 Semen 15 7R2 5 cs R Emma Recap Quiz 3 The natural rate of unemployment is the level of unemployment where 1 unemployment is 0 2 cyclical unemployment equals frictional unemployment 3all unemployment is structural 4 there is an expansionary gap Z 5 cyclical unemployment equals 0 Nuyy 4m 2mm ECON 175mm 13 7 Page 19 as R Esmuina l Recap Quiz 4 The difference between the actual unemployment rate and the natural rate of unemployment is what type of unemployment 1 structural 2 frictional Z 3 cyclical 4 smsonal 5 potential Nuyy 4m 2EIE2 ECON 175mm 15 7R2 2 as R Emma ii Recap Quiz 5 The natural rate of unemployment in the United States over the past 20 years has 1 increased Z 2 decreased 3 remained constant 4 uctuated dramatically 5 uctuated slightly Nay 4m 2mm ECON 1 75mm 13 7 Page 21 as R Esmuina bl Quick Question 1 True or False All recessions are the result of output gaps False A recession is a period of unusually slow growt This could result from a recessionary output gap but it could also result from slow growth in potential output due to such factors as belownormal rates of technological innovation Nay 4m 2EIE2 ECON 175mm 15 7R2 22 as R Emma g Quick Question 2 True or false When output equals potential output the unemployment rate is zero False When output equals potential output the unemployment rate equals the natural unemployment rate Cyclical unemployment is zero when output equals potential output but frictional and structural unemployment still exist Nay 4m 2mm ECON 1 75mm 13 7 Page 23 as R Esmuina Quick Question 3 Which firm is likely to see its profits reduced the most in a recession An automobile producer A manufacturer of boots and shoes A Barbershop Which is likely to see its profits reduced by the least Nay 4m 2EIE2 ECON 1 7 saman 15 7R2 24 as R Emma Quick Answer Generally producers of durable goods are affected most by recessions while producers of services and nondurables like food are affected least This suggests that the automobile producer would see its profits reduced the most the barbershop the least Boots and shoes are semidurable since a pair of shoes ma last for several years and people can put 0 f purchases of these for a while if necessary Thus the boo manufacturer s losses are likely to fall in between those of the other two firms Nuvl 4th 2002 ECON 175mm 13 7 Page 25 651 R Estaplna I Problem 244 FampB page 653 Using Okun s Law ll in the four pieces of missing data in the table YEAR REAL GDP Potential Natural Actual v GDP 7 Vquot Unem rateaUquot Unem RateaU 200 1 7840 8000 A 6 na 2002 8100 B 5 na 5 na 2003 C 8200 45 na 4 na 2004 84 15 8250 5 na D Nay 4th 2EIE2 ECON 175mm 15 7R2 2a 651 R Bfwlna Problem 244 cont d Once again Okun s Law Each extra percentage point of cyclical unemployment is associated with 2 percentage point increase in output gap And Cyclical Unemployment Extra unemployment that occurs during recession supply of workers gt demand jobs available Nay 4th 2002 ECON 1 75mm 13 7 Page 27 651 R Estaplna ii Problem 244 cont d A In 2001 Y 7840 Yquot 8000 YY 150 In sooo7s4osooo2 That means in 2001 ral GDP is 2 below potential GDP so cyclical unemployment is 1 Since the actual unemployment rate U is 6 the natural rate U must be 5 I B In 2002 The natural rate U equals the actual rate U so cyclical unemployment equals Zero and there is no output gap Thus potential output equals 8100 the same as actual real GDP Nay 4th 2EIE2 ECON 1755mm 1E 7P3 2E 35 R Stains g Problem 244 cont d C In 2003 Cyclical unemployment equals UU 4 45 05 By Okun s Law the output gap YY is7 1 If real GDP exceeds potential GDP by 1 we find that real GDP must equal 8282 Calculation Y 8200 YYY 1 D Y 8282 Nay 4th 2002 ECON 1 75mm 13 7 Page 29 651 R Estaplna Problem 244 Conclusion I D In 2004 Real GDP is 2 above potential GDP the output gap is 72 Calculation Y 8250 Y8415 YYY 0 So cyclical unemployment should be 71 As the natural unemployment rate U is 5 actual unemployment U is 4 Cyclical Unemployment U U Nay 4th 2EIE2 ECON 1 7 55mm 15 7R2 3a 651 R lemma g Problem 242 FampB page 653 I Given data for real and potential US GDP calculate output gap as a In of potential GDP um any NW a ng ECDNlrseztlan Bengal as a Elamquot g Problem 242 cont d Remember Potential Output 0 Output GDP that an economy can produce when using resourcs capital labor at normal rates Output Gap YY If YgtY Recessionary Gap If YltY Expansionary Gap NW or m2 ECDN team 134 qu as a Elamquot Problem 242 cont d So the YEAR REAL EDP Is it a recessionary or expansionary gap NW a ng ECDNlrseztlan meme as a Elamquot g Problem 242 cont d Also calculate growth rates of real GDP Can you ldenufy the recesslon that occurred durlng ml perlod7 REAL EDP NW or m2 ECDN team mama as a Elamquot Problem 242 cont d Remember from lecmre us real GDP and recesslons lvmmwl rower 7 r B I cquot 0 all r g 2 an e lmn NW a ng ECDNlrseztlan mamas as a Elamquot g Problem 242 Conclusion You can see that GDP growth slowed in 1990 as the recession began In 1991 GDP growth was negative and a significant recessionary gap opened up Growth at close to normal rates resumed in 1992 which is why the trough is assigned to 9 1 91 but the recessionary gap took a while to be eliminated NW a me ECDN 15mquot mucus as R more Problems for next sections H For next section ChaEter 25 Problems 6 7 8 9 Chanter 26 Problems 3 8 9 Remember This is not mandatory It won t be graded Only for those of you that need improvement in Exam grades Nay 4m 2mm ECON 1755mm 3 7 Page 37 as R EstDina l Next class Next Class Section 19 7 Wednesday Nov 6th If you want more practice work on Next Sections Problems Read ch 25 amp 26 You can download handouts this afternoon Thankyou for coming on time H CU Wednesday Nay 4m 2EIE2 ECON 1755mm m 4292 35 as R Bfwina ECON 1 Section 15 Growth Productivity and Living Standards on 234 2112 ECON 1752mm 15 4192 1 651 R Esmpm l Contact Details GSI Ramon Estopina Office Hours Thursday 145345 PM Office Evans 5087 Email estopinahaasberkeleyedu Handouts only sections 104 81 133 after class in httpwwwocfberkeleyedujaychenecon1 Please read Read before downloading ECON 1752mm 15 4292 2 651 R 131mm g Section 15 Agenda Administrative Stuff 3 min Problem 197 7 min Recap Quiz 5 min ExtraQuick Exercise 3 min Problem 203 10 min Problem 208 10 min Midterm survey 5 min VERY IMPORTANT Recap 2 min on 23521512 ECON 1755mm 1541923 651 R Esmuna g Administrative Stuff Remember PS3 due next Monday October 28quot Check for corrections and hints on PS3 wording in Econ1 website I will grade PS only from students officially in my sections on 2314 2112 ECON 1752mm 15 7P3 4 651 R 131mm Review of Last Lecture 1021St Chapter 20 Economic growth GDP per person NPop determinants YN determinants Costs of economic growth Policies to promote growth on 23521512 ECON 1755mm 1542925 651 R Esmuna Important to remember GDP per person YPop Y total real output or real GDP III number of employed workers POP total population all ages YPOP average labor productivity share of employed population 651 R 131mm 539 Problem 197 FampB page 507 rices from 1978 to 1986 CPI on 23 2m2 ECON 1755mm 1542927 351 R Esmuna ii Problem 197 cont d After all the calculations Year CPI Does it look as if in ation affected gasoline price changes on 2342m2 ECON 1755mm 1542929 351 R Esmuna g Problem 197 cont d Now let s add change in price of Crude Oil1 Esme 351 R Esmulna l Problem 197 cont d Work with the data and say if the changes in gas prices during this period were due to General inflation or Factors speci c to the oil market Remember Are prices nominal or real NOMINAL Need to convert to real to know variation And also need to know inflation on 23 2m2 ECON 1752mm 15 4292 a 351 R Stains ii Problem 197 cont d Put it in another words ansm Any relation between gas price change and in ation On 23 2m2 ECON 1755mm 5 7P3 1D 35 R Stains gi Problem 197 Conclusion A large part of the fluctuations in gas prices reflected changes in the relative price of oil rather than general inflation Interestingly the relative price of gas fell 27 in 1986 even as the general inflation rate was positive on 2314 2m2 ECON 1755mm 15 4292 12 351 R Stains g Recap Quiz 1 Economists focus on which of the following measures as an indication of a country39s living standard 1 The unemployment rate 2 In ation 3 GDP Z4 GDP per person 5 Interest rates on 23 2m2 ECON 1755mm 154292 13 GSI R Esmuina l Recap Quiz 2 Which of the following has contributed to the increase in real GDP in the US over the past four decades 1 Increasing female labor force participation 2 The baby boom 3 Increasing average labor productivity 4 The rising share of Americans with jobs Z 5 All of the above on 2314 2m2 ECON 1755mm 15 wage 14 GSI R 13mm g Recap Quiz 3 Which of the following is a measure that policymakers might take to raise a country39s rate of economic growth 1 Promote saving and investment 2 Increase human capital 3 Support research and development 4 Provide an appropriate political and legal framework ZS All ofthe above on 234 2m2 ECON 1 755mm 15 7 Page 15 GSI R Esmuina g Recap Quiz 4 The talents education training and skills of workers are known as 1 physical capital 2 personal capital 2 3 human capital 4 labor capital 5 worker capital on 2314 2m2 ECON 1755mm 15 4292 15 GSI R Stains ExtraQuick Exercise How much would 500 deposited in an account be worth after 2 years with A 5 simple interest Remember C C0tC0r C01rt 500 2500 X 005 550 B 5 compound interest Remember C CH1r C01rI 500 10052 55125 on 234 2m2 ECON 1 755mm 15 7 Page 17 GSI R Esmuina ExtraQuick Exercise 2 The power of compound rates Think years or periods Amnunl n2 o5 Rmizmieiaznzzuzezaan Years on 14 2m2 ECON 1755mm 15 4292 IS GSI R B m i Problem 203 FampB page 539 raction of population retired in US will increase with the graying of America Suppose in 2038 the share of population that is working returns to 1960 level But Labor productivity increases as much as during 6099 Avg Labor Productivity NPop 1950 35 835 354 What would be the net change in GDP per person between 1999 and 20387 On 23quot2EE2 E CON 175mm 15 7 Page 19 351 R Esmuina ii Problem 203 Conclusion So in this scenario output per person will be higher in 2038 relative to 1999 but by much less than implied by the increase in labor productivity The projected decline in the share of the population that is working implies that output per person will grow more slowly than average labor productivity on 234 2m2 ECON 1 755mm 15 7 Page 21 351 R Esmuina I Problem 203 cont d Remember GDP per person39 NPop YPop Change 354 on 23 2m2 ECON 1752mm 15 7R2 2 351 R Stains 1 Problem 208 FampB page 540 Hester s Hatchery raises fish At the end of the current year she has 1000 fish in ht She can harvest any number of fish she wishes selling them at 5 a piece Because big fish make little fish I really like this sentence for every fish she leaves in the hatchery this year she will have 2 fish at the end of next year The price next year is expected to be 5 too Problem 208 cont d A How many fish should Hester harvest if she wants to maximize the growth of her stock of fish from this season to next season Zero as that will allow her stock of sh to double by next year Any problems with that on 234 2m2 ECON 1 755mm 15 7 Page 23 351 R Esmuina on 2314 2m2 ECON 1752mm 15 7R2 22 351 R Stains Problem 208 cont d B Is this and economically sound strategy Maximizing the growth of her stock of sh has the isadvanlage that it allows Hester no current income to s end In other words Hester can have the bene t ofa very high income and consumption next year only at the cost of stapling herself this year How does it relate to the cost of Economic wth The more a country is willing in stable itself this year by saving and investing its resources in new capital goods rather than consuming the faster it wi l row Remember the CostBene t principle on 23142m2 Km17samm157vageza 351 R Stains g Problem 208 cont d C How many fish should Hester harvest if she wants to maximize her current income Suppose she doesn t have any other source of income To maximize her current income Hester should sell all her sh this year realizing 5000 Any problem with this It leaves no source of income for the future on 23 2m2 ECON 175mm 15 7 Page 25 GSI R Esmuina I Problem 208 cont d D So what should she do Why If Hester hamsis none of her sh this year she has no income this year and if she hanesls all of her sh this year she has no income next year Having very low or zero income in either year is very unplmsant for Hester A better choice is to sell some sh this ymr allowing for a reasonable level ofcurrent income and consumption while leaving enough sh in the hatchery to provide for reasonable income in the future as well on 23 2m2 ECON 175mm 15 7R2 25 GSI R 13mm ii Problem 208 Conclusion 0k enough about fish what about Macroeconomics In the same way a country should choose a rate of economic growth that balances the cost of sacrificing consumption today against the benefits of higher income and consumption in the future And you think economists get paid for this on 234 2m2 ECON 1 755mm 15 7 Page 27 GSI R Esmuina 1 Problems for next sections H For next section w 2 3 5 amp 9 Remember This is not mandatory It won t be graded Only for those of you that need improvement in Exam grades actually more than some of you on 2314 2m2 ECON 175mm 15 7R2 23 GSI R 13mm Midterm Survey 7 Lecture Course ll Before you go Please complete bottom part of Survey now It refers only to LECTURES AND COURSE not to sections Forget about the upper part I do not want to know what you think about me No really I have an Online survey ready for you l on 234 2m2 ECON 1 755mm 15 7 Page 29 GSI R Esmuina v Midterm Survey 7 GSI Section H Midterm Survey only for GSI amp SECTIONS go to htt wwwzoomeran com surve z 288CDP F7CSQLV2GRNDLP3VL Is it hard to remember Then I ll add a link in our website httpwwwocfberkeeyedujaychenecon1 Please help me improve teaching by filling the survey it won t take more than 5 min No names needed but please only sections 104 and 133 And only fill the survey once on 2314 2m2 ECON 175mm 15 7R2 an GSI R 13mm ii Next class Negtltt Class Section 15 7 Monday Oct 28m PS3 DUE l Ifyou want more practice work on Next Sections Problems Read ch 22 23 amp 25 FILL THE SURVEY ONLIN You can download handouts this afternoon Thank you for coming on time Enjoy the weekend on 23 2m2 ECON 1755mm 15 7 Page 31 351 R EstDina ECON 1 Section 16 Savings and Capital Formation o 2 m m as W R l Contact Details GSI Ramon Estopina Office Hours Thursday 145345 PM Office Evans 5087 Email estopinahaasberkeleyedu Handouts only sections 104 amp 133 after class in httpwwwocfberkeleyedujaychenecon1 Please read Read before downloading on 23quot 2m2 ECON 1752mm 15 wage 2 as R Emma g Section 16 Agenda Administrative Stuff 3 min Recap Quiz 5 min Problem 222 10 min Problem 223 10 min Problem 229 15 min Recap 2 min on 23m 2m2 ECON 1755mm 1543923 651 R Esmuna g Administrative Stuff PS3 due today Leave them on the table I will return them next Monday Remember to complete the survey online on 23m 2m2 ECON 1752mm 15 wage 4 as R Emma Review of Last Lecture 1023rd Chapter 22 Saving National Saving Public and Private saving Saving as ow wealth as stock Changes in Wealth Why people save impact of r on savings Factors that affect I impact of r on investment S and D for savings and investment 51 in closed econom S amp D for funds S amp I shifts of S and D crowding out on 23quot 2m2 ECON 1755mm 1542925 651 R Esmuna Important to remember National Savings Saving of total economy GDP less consumption expenditures and government purchases of goods and senices S Y r C r G National Savings Private Sav Public Sav servants 3R A 539 V m Rngzm on 23quot 2m2 ECON 1752mm 15 4292 5 as R Emma l Recap Quiz 1 The saving rate is equal to 1 current income minus spending on current needs Z 2 saving divided by income 3 income minus consumption 4 the change in saving that corresponds to a change in income 5 saving divided by consumption on 23quot 2m2 Econ 1755mm 11541927 651 R Esmuna I Recap Quiz 2 Wealth can be defined as 1anything of value that one owns 2the debt one owes 3total income plus savings Z4assets minus liabilities 5income plus assets on 23quot 2m2 Econ 1752mm 15 4192 a 651 R Stains l Recap Quiz 3 Increases in the value of existing assets are known as 1weath 2 savings 3 capital gains 4 capital losses 5 income on 23quot 2m2 Econ 1755mm 11542929 651 R Esmuna 1 Recap Quiz 4 If tax collections egtltceed government spending there is a budget 1 shortfall 2 deficit Z 3 surplus 4 windfall 5 balance on 23quot 2m2 Econ 1755mm 15 4292 1a 651 R Stains Flows and Stocks REMEMBER Flow A measure that is de ned per unit of time Stock A measure that is defined at a point 397 time on 23quot 2m2 Econ 1 755mm 15 7 Page 11 651 R Esmuina Problem 222 FampB page 600 State whether each of the following is a stock or a flow and explain A The Gross Domestic Product B National Savings C The value of the US housing stock on Jan 1st 2001 D The amount of US currency in circulation as of this morning E The government budget deficit F The quantity of outstanding government d b 1st 2001 e ton Jan on 23quot 2m2 Econ 1755mm 15 4292 12 651 R Stains Problem 222 cont d A The Gross Domestic Product Flow GDP represents production per unit of time such as a year or a quarter B National Savings Flow National saving is measured per unit of time analogous to individual saving C The value of the US housing stock on Jan 15 2001 Stock This value is measured ata point in time on 2339quot 2m2 ECON 1755mm 154252 13 651 R Esmuina ii Problem 223 FampB page 600 WM Lifecycle saving for longterm objectives Retirement College tuition Buying home or car Precautionary saving for unexpected setbacks Loss of job Medical emergency Bequest saving to leave an inheritance on 23quot 2m2 ECON 1 755mm 15 7 Page 15 651 R Esmuina g Problem 223 cont d For lifec Ie rasons anticipation offuture chil care expenses tuitions Ellie and Vince will probably incrmse their current saving There is also the possibility that in the future one or bot arents ma work less in order to e a home to prepare for the possibility of reduced income in the future the couple should save more B Vince reads in the paper about posible layoffs in his industry Vince srisk of layoff has incrmsed so the couple ould incrmse their saying for Erecaulinnau reasons on 23quot 2m2 ECON 1 755mm 15 7 Page 17 651 R Esmuina l Problem 222 Conclusion D The amount of US currency in circulation as of this morning Stock Again the value is measured ata point in time E The government budget de cit Flow The de cit is the government s spending less its receipts Spen ing and receipts are measured per unit oftime such as a year or quarter F The quantity of outstanding government debt on Jan 15 2001 Stock The quantity ofgovernment debt outstanding is measured ata point in time on 25m2m2 ECON 1755mm 15 4252 14 651 R 13mm ii Problem 223 cont d Ellie and Vince are a married couple both with college degrees and jobs How would you expect each of the following events to affect the amount they save each month A Ellie learns she is pregnant on 23quot 2m2 ECON 1755mm 15 4252 15 651 R 13mm gi Problem 223 cont d C Vince had hoped that his parents would lend him money for a purchase of a home Now he learns they can t afford it More saving is needed to meet a lifecxcle D Ellie announces that she would like to go to law school in the next few years More saving is needed for a lifecycle objective as the couple faces both a reduction in their income and tuition expenses in a few years they need to save more now on 255252 ECONJrEemml J amm 651 R 13mm