What Determines the Level of Aggregate Economic Activity? What Causes Changes in Aggregate Economic Activity (i.e. Economic Growth and Business Cycles)?
- Read Module: Macro Workings and Module: Keynesian & Neoclassical Economics
- The Wall Street Journal
Video Lecture Clips:
- Introduction to Macro Models
- Theory of Consumption Expenditure – Part 1
- Theory of Consumption Expenditure – Part 2
- Theory of Investment Expenditure – Part 1
- Theory of Investment Expenditure – Part 2
- Theory of Investment Expenditure – Part 3
- Theory of Investment Expenditure – Part 4
- The Income-Expenditure Model – Part 1
- The Income-Expenditure Model – Part 2
- The Income-Expenditure Model – Part 3
- Business Cycles
- The Spending Multiplier
- The Supply Side Model
- The Supply Side Model – Part 2
- C. Alan Garner, “How Fast Can the U.S. Economy Grow?” Federal Reserve Bank ofKansasCity Economic Review, Dec 1989, pp. 24-39
- The Economist reviews Robert Gordon’s “Is US Economic Growth over?”
- Stephanomics, Series 2, Episode 1
- The Invisible Hand, Episode 8: The Paradox of Thrift (download first, then listen)
LEARNING OBJECTIVES FOR TOPIC 8:
This topic is a critical part of the course. It’s where we learn the two key macro models we’ll use for the rest of the course.
- You should be able to explain both the economic growth model and the income-expenditure (or Keynesian Cross) model in your own words.
- You should be able to use the models to determine how changing a parameter in the model (interest rates or improvements in technology, for example) will affect the economy in the short term or the long term.
- You should be able to explain the relation between actual and potential GDP, and identify the factors which affect each of them.
- You should be able to define macro equilibrium, and show it graphically.
- You should be able to explain and demonstrate graphically changes in GDP, both business cycles and economic growth.