Chapter 10 Macroeconomics

Front 1

during recessions, output...

Back 1

declines

Front 2

during expansions, output..

Back 2

rises quickly

Front 3

d: boom

Back 3

output exceeds potential output

Front 4

can the classical model explain real world economic fluctuations through shifts in labor demand

Back 4

no

shifts in the labor demand curve are not very large from year to year

shift inward- people do not become all of a sudden less productive

shift outward- people do not automatically have large amounts of new capital or physical capital, it takes time

Front 5

can the classical model explain real world economic fluctuations through shifts in labor supply

Back 5

no

shift inward- peoples preferences do not change rapidly

shift outward-

Front 6

description recession

Back 6

output below potention
people want to work, but firms wont hire them
managers want to hire them, but they arent selling enough output

Front 7

description boom

Back 7

unemployment rate is so low that normal job search activity is haywire
wages increase
production costs increase
firms raise prices

Front 8

what is the result of the hiring crisis during a boom

Back 8

firms are desperate to hire people since production is so high that they dont really care who they hire.
there is a poorer than normal match between workers and jobs

Front 9

why isnt all savings supplied to the loanable funds market

Back 9

may save money in ways that dont allow your funds to be accessible to the loanable funds market (putting it in a piggy bank)
if they dont put the money back into banks, etc. then the interest rate will not change (violates say's law)

Front 10

saving and lending in the economy is done through

Back 10

financial intermediaries

Front 11

how do banks affect total spending

Back 11

if banks become pessimistic, they wont lend out as much funds so the rate of planned investment will not change etiher

Front 12

1960s: Vietnam

Back 12

expansion
increase in defense spending

Front 13

1970s: change in fed policy

Back 13

recession
decrease spending on new homes

Front 14

1974: dramatic increase in oil prices (OPEC)

Back 14

recession
spending on cars and other energy using products decrease

Front 15

1980: dramatic increase in oil prices

Back 15

recession
spending on cars and other energy using products decreases

Front 16

1981-82: change in Fed policy

Back 16

recession
spending on new homes cars, and business investment decreases

Front 17

early 1980s: military build up

Back 17

increase defense speninding
expansion

Front 18

late 1980s: dramatic decrease in oil prices

Back 18

spending on energy using products increases

Front 19

1990: large increase in oil prices, collapse of the soviet union

Back 19

recession
spending on cars and other energy using products decrease
defense spending increase

Front 20

1991-2000: technological advances in computers, internet, high wealth creation

Back 20

expansion
spending on capital cequipment increase
consumption spending decrease

Front 21

2001: investment in new tech slows

Back 21

recession
spending on cap equipment decreases

Front 22

2002-2007: changes in fiscal and fed rerve policies

Back 22

consumption spending increases
expansion

Front 23

2008-?: oil prices rise, housing bubble bursts; financial crisis

Back 23

recession
spending decreases