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CH 9 Notes

2 Pages

Course Code
ECON 1132
Richard Tresch

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CH 9 - The business cycle: the continuing pattern over time of expansions and  contractions, booms and busts, in the circular flow of economic activity in  capitalist economies - Macroeconomic policy: an attempt to achieve the macroeconomic  policy goals by intervening in some form in the operation of the economy o Target the economy itself, not the policy goals - Fiscal Policy: Changes inf e ther al budget made for the specific purpose of  influencing the level and the composition of the circular flow of economic  activity; includes changes in government spending on goods and services,  changes in transfer payments and taxes - Monetary Policy: Changes im n theey  supply for the specific purpose of  influencing the level and composition of the circular flow of economic activity - Federal Reserve Banking System: The central bank of the US - The 3 part economic problem: objectives (four macro policy goals), alternatives  (policy options available), and constraints (the economy itself) - Macro models all try to explain what forces determine the level and the  composition of the circular flow of economic activity - Y =  Cd +  Id +  Gd +  (EXd – Imd) - New classical economists do not believe that the government  can do much to improve the private economy in the short run ▯  occaisional doses of fiscal and monetary policies are bad  medicine, the gov should announce it’s intended policies and  stick to them so private economy knows what the gov is doing - New Keynesian like policies - New Classical Model: economy is governed by laws of supply and   demand, product and factor markets are highly competitive,  predicts that US will always be operating on PPF - Aggregate demand: the total quantity of final goods and services  demanded at each overall price level by al the final demanders  in the economy; the aggregate demand curve labeled AD, is a  graph of aggregate demand - Aggregate supply: The total quantity of final goods and services  supplied at each overall price level by all the producers in the  economy; the aggregate su
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