ECON 001B Lecture Notes - Lecture 16: Moe Williams, Potential Output, Diminishing Returns
Document Summary
Enhance property rights and rule of law. Us is less corrupt due to free press. Funding for education; better skilled, faster economy will be. Brain drain people leave for high income countries. Keep in mind diminishing returns *** business cycles economy in short-run. Over short period of time, growth is not smooth the business cycle. Not identical; start from different places but certain common features that have single explanation by why things happen. Why gdp, inflation, employment move together on graph. Along 45 degree line show potential points of macroeconomic equilibrium. Ae is function is amount of planned ae that occur at every level of y (gdp) If not at equil, moving towards it (adjustment process happen through inventory) Inventories decline, spending is greater than production recession on diagram. Increase in spending leads to magnified effect on gdp5. Why does it happen consumption (consumption depends on gdp)
