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TEST 2 ECON

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Department
Economics
Course
ECON 2010
Professor
All Professors
Semester
Fall

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TEST 221808Jobless ClaimsNo big surprises this week everything we expectedDecrease of 9000 but in the 4 week moving average increased of 12000 because we dropped off those two low weeksWere getting close to prerecessionary levels to that stagnant market benchmark Were at 34725022008Practice Problems Chapter 7 1 3 4 5ac 68CPI MMSANOVDECJANTOTAL090404CORE020203January CPIoFirst inclination of inflation in the US in 2008oPercent change in CPI means whatCPI is a measure of the aggregate price level at the consumer or retail levelPercent change is the percent change in the aggregate price level which is the inflation rateoSo these are the inflation rates What follows in parentheses is month to month percent change seasonally adjustedoThe table represents the inflation ratesoThe CPI is calculated on a fixed basket of goods total is all the goods core is all goods excluding food and energyoIn November all items caused a change of 09 and core rate of 2 See other months aboveoLets interpret thatOverall the price of all the goods and services in the basket increased by 09 from the previous month October It was 04 in December from November And so on in January So prices went up in November December and January So the rate of inflation went up also but it went up more slowly from in Dec than in November so the inflation rate went down The inflation rate in January compared to December stayed the same even though the CPI went upSame basis for Core level Rate of inflation in Dec according to the Core was the same as it was in November In January at the core retail level the inflation rate increased oThese are good multiple choice questionsoUnderstand what is the difference between prices increasing and increase in inflation rate oPolicy makers put a lot more emphasis on the CORE rate when fighting the recessionary powersNot because its more important but because its more stable less volatile There are revisions of these numbers in the next upcoming monthsoThere are revisions because of the recalculated seasonal adjustments The seasonal adjustments can get out of wack and thats why we revise them a few times Changing focus in MacroeconomicsWe learned about supply and demand then the basic ideas of economic growth GDP unemployment rates and inflation rates Now we turn our attention to looking at the performance of the macroeconomy We know what the economy is all about so we want to see how it performsIt is a big change of focus only began looking at this about 10 years agoWe used to only look at the short run business cycle then we started to analyze the long runOver the last 12 years we started looking at the long run first what describes the long run performance why are some countries richer or poorer over a longer period of time decades or moreIn 1998 US was 7 years into an expansion In the 80s we were 8 years in economic growth It looked like we were experiencing less recessions over time longer periods of expansion Fewer recessions shallowerThe business cycle didnt seem to be so much of a problem It may be true but were on the brink of a recession and this is all that gets talked about So it still is a real topic The recession is still really importantTo get a basic idea READ CHAPTER 7 to pick up most of the important parts Were only going to talk about a simple modelGrowth Theory Model this is how economist look at the world ypopyNxNpop whereoyreal GDPoNnumber of workersopoppopulation of the countryoThis is not an equation There is a 3 barred equal sign It says that this is always an equality there is no less than or more than it is always equal because you can cancel out the Ns on the right side and it will equal the left sideoHow can this definition help us to understand how the economies growLook at the component partsy means real GDPPop is population of the countrySo the left hand side of the equation is GDP per capita output of goods and services per person including all people newborn to oldest personThere are limits to GDP per capita 0 to infinity Cant be negativeN is the number of workers in the countrythe number of people employedSo yn is real GDP per worker which is a measure of productivity output per worker in the countrynpop is the number of workers divided by the population which is the percent of the population that is workingThe lowest productivity can be is 0 but there is no upper limitFor percent of working people the limits are 0 to 1 Because it goes from 0 to 100 of the population workingAssumptions of this modeloypop is a measure of living standardsGDP per capita may not be a perfect measure of living standards but this is how we look at it as economists If it is increasing we will conclude that we have more goods and services per person so living standards are increasing oWorker is defined as a person working in market economy
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