Bài giảng Macro - Chapter 7 Introduction to Economic Growth & Fluctuations

Introduction to Economic Growth & FluctuationsChapter 7SLIDES PREPARED BY JUDITH SKUCE, GEORGIAN COLLEGEIn this chapter you will learnThe definition and causes of economic growthThe nature and cause of the business cycleThe nature of unemployment and its measurementThe definition of inflation and how it is measuredThe redistribution effects of inflationThe output effects of inflationChapter 7 TopicsEconomic GrowthThe Business CycleUnemploymentInflationRedistribution Effects of InflationEffects of Inflation on OutputEconomic Growthan increase in real GDP over some time period, ORan increase in real GDP per capita over some time periodEconomic GrowthGrowth as a GoalArithmetic of GrowthMain Sources of GrowthGrowth in Canadaimproved products & servicesadded leisureother impactsRelative Growth RatesChapter 7 TopicsEconomic GrowthThe Business CycleUnemploymentInflationRedistribution Effects of InflationEffects of Inflation on OutputPhases of the business cycleLevel of real outputTimeThe Business CycleFigure 7-1PEAKTimePhases of the business cycleLevel of real outputThe Business CycleFigure 7-1RECESSIONTimePhases of the business cycleLevel of real outputThe Business CycleFigure 7-1Canadian Recessions: Post 1945% Decline in Annual Real GDPTROUGHTimePhases of the business cycleLevel of real outputThe Business CycleFigure 7-1RECOVERYTimePhases of the business cycleLevel of real outputThe Business CycleFigure 7-1GROWTHTRENDTimePhases of the business cycleThe Business CycleFigure 7-1Level of real outputprovincial variationsThe Business CycleCausation: A First Glanceinnovationchanges in productivitymoney supply changestotal spending changesCyclical Impact: Durables & NondurablesChapter 7 TopicsEconomic GrowthThe Business CycleUnemploymentInflationRedistribution Effects of InflationEffects of Inflation on Outputlabour force16 milliontotal population 30.75 millionunemployed - 1.1 millionEmployed(14.9 million)Not in labour force(8.3 million)Under 15 &/orinstitutionalized(6.3 million)Unemploymentrateunemployedlabour forcex100=Unemploymentrate 2000=1,100,00016,000,000x100=6.8%Measurement of UnemploymentMeasurement of UnemploymentCriticisms of the calculation:part-time employmentdiscouraged workersTypes of UnemploymentFrictional UnemploymentTypes of UnemploymentFrictional UnemploymentStructural UnemploymentTypes of UnemploymentFrictional UnemploymentStructural UnemploymentCyclical UnemploymentDefinition of “Full Employment”natural rate of unemployment (NRU)NOT zero unemploymentoccurs when the # of job seekers equals the # of job vacanciesnot automaticvaries over timeEconomic Cost of UnemploymentGDP Gap & Okun’s LawThe amount by which actual GDP falls short of potential GDPFor every 1% unemployment exceeds the natural rate.A GDP Gap of about 2% occursGDP Gap & Okun’s Law: An ExampleGiven for 1992: Actual Unemployment Rate = 11.3% Natural Unemployment Rate = 7.5% Potential GDP = $770 billion Find 1992 GDP Gap Solution: GDP Gap in % = (11.3-7.5) x 2= 7.6% GDP Gap in $ = 7.6% x 770 = $59 billionEconomic Cost of UnemploymentUnequal BurdensOccupationAgeGenderEducationEconomic Cost of UnemploymentNon-Economic CostsRegional VariationsRegional VariationsEconomic Cost of UnemploymentNon-Economic CostsRegional VariationsInternational ComparisonsGLOBAL PERSPECTIVE 7-2Canada’s unemployment rate came down steadily through the 1990sChapter 7 TopicsEconomic GrowthThe Business CycleUnemploymentInflationRedistribution Effects of InflationEffects of Inflation on OutputInflationMeaning of Inflationa rise in the general level of pricesMeasurement of Inflationcalculate with price indexesInflationratelater index - earlier indexearlier index=Facts of InflationThe major periods of inflation in Canada were in the 1970s & 1980sGLOBAL PERSPECTIVE 7-3UKGermanyJapanCanadaUSFrance199019952000inflation rates in Canada in the 1990s were relatively lowTypes of InflationDemand-Pull Inflationexcess demandCost-Push Inflationper-unit production costssupply shocksComplexitiesChapter 7 TopicsEconomic GrowthThe Business CycleUnemploymentInflationRedistribution Effects of InflationEffects of Inflation on OutputNominal & Real Incomereal income=nominal incomeprice index% change in real income  % change in nominal income– % change in price levelWho is Hurt by Inflation?assuming unanticipated inflationFixed-income receiversSaversCreditorsWho is Unaffected or Helped by Inflation?assuming unanticipated inflationFlexible-Income receiversDebtorsAnticipated InflationEffects are lessened to the extent inflation is correctly anticipatedCOLA clausesinflation premium on loansNominalInterestRate=11%Inflation PremiumFig. 7-5NominalInterestRateRealInterestRate=11%5%Inflation PremiumFig. 7-5NominalInterestRateRealInterestRateInflationPremium=11%5%6%+Inflation PremiumFig. 7-5AddendaDeflationMixed effectsArbitrarinessChapter 7 TopicsEconomic GrowthThe Business CycleUnemploymentInflationRedistribution Effects of InflationEffects of Inflation on OutputEffects of Inflation on OutputCost-Push Inflation & Real OutputDemand-Pull Inflation & Real OutputHyperinflation & BreakdownChapter 7 TopicsEconomic GrowthThe Business CycleUnemploymentInflationRedistribution Effects of InflationEffects of Inflation on OutputBUILDING THE AGGREGATE EXPENDITUREMODELChapter 8NEXT