ECON 2H03 Lecture Notes - Lecture 1: Monetary Policy, Stock Market, Global Issue
3 May 2018
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Lecture 1
An economic tour of the world
• Macroeconomics is:
o Economics on a larger scale
o Focused in GDP
• 2008-2009 world economic crisis
o Caused by the banks of America
o House pries were iflatig ausig a ule to for
o Once houses started falling in value, borrowers began defaulting on their
mortgages
o September 15, 2008 Lechman Brothers bank went bankrupt
• Why did this happen?
o High demand for houses resulted in rice inflation
o The increase in prices created an incentive for banks to give out more loans
o Houses were often used as collateral
o To keep the market high the banks gave mortgages to sub-prime markets
▪ Subprime: people with low credit scores
o At some instance in time people started to default payments which resulted in
lower demand for houses and prices started to fall
o This commonly referred to as the bubble bursting
• Effect on the rest of the world
o Us housing market crash turned in to a global issue
o US stock prices fell
o Equivalently Stock market prices in the rest of the world fell as much
o Household reduced their spending on goods which caused the problem to
worsen
• Policy Response to the Crisis
o Government started to implement monetary and fiscal policies
▪ Monetary policy: Printing more money and reducing interest rates
▪ Fiscal Policy: Changing tax levels and government spending
• Other easures of iterest
o Per capita output
o Output growth
o Unemployment rate
o Inflation rate
• Effects on Canada
o High unemployment
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