Abel & Bernanke Ch. 8, 10 - 11 Key Macroeconomic Theories of the Business Cycle.

Abel & BernankeCh. 8, 10 - 11

Key Macroeconomic Theories of the Business Cycle

Figure 1.1 Output of the U.S. economy, 1869–2002

Figure 1.2 Average labor productivity in the United States, 1900–2002

Figure 1.3 The U.S. unemployment rate, 1890–2002

Figure 1.4 Consumer prices in the United States

Figure 1.5 U.S. exports and imports, 1869–2002

Figure 1.6 U.S. Federal government spending and tax collections, 1869–2002

Figure 8.1 Business cycles (Ch. 8)

Figure 8.2 Index of industrial production, January 2000–April 2003

Figure 8.3 Total nonfarm employment, January 2000–April 2003

Figure 8.5 Cyclical behavior of consumption and investment

Total Output = Y = C + I + G + NX

Figure 8.12 The aggregate demand–aggregate supply model

Figure 8.13 An adverse aggregate demand shock

Figure 8.14 An adverse aggregate supply shock

Neoclassical / Real Business Cycles (Ch. 10): Figure 10.3 Small shocks and large cycles

Figure 10.4 Effects of a temporary increase in government purchases

Figure 10.6 The aggregate supply curve in the misperceptions theory

Figure 10.7 An unanticipated increase in the money supply

Figure 10.8 An anticipated increase in the money supply

Key Diagram 8 The misperceptions version of the AD–AS model

Keynesianism (Ch. 11): Figure 11.1 Determination of the efficiency wage

Figure 11.2 Excess supply of labor in the efficiency wage model

Table 11.1 Average Times Between Price Changes for Various Industries

Figure 11.3 The effective labor demand curve

Figure 11.4 An increase in the money supply

Figure 11.4 An increase in the money supply (cont’d)

Figure 11.5 An increase in government purchases

Figure 11.5 An increase in government purchases (cont’d)

Figure 11.6 An increase in government purchases in the Keynesian AD–AS framework

Figure 11.7 A recession arising from an aggregate demand shock

Figure 11.8 Stabilization policy in the Keynesian model

Figure 11.9 An oil price shock in the Keynesian model

Key Elements of Monetary and Fiscal Policies

• Monetary Policy is controlled by the Federal Reserve which has two, competing goals:

– Stimulate healthy economic growth, and– Control inflation at a manageable level.

• Fiscal Policy is controlled by the Federal Government which has three key tools:

– Discretionary government spending,– Ability to enact new taxes (to increase Govt. Revenue), and– Automatic Stabilizers (e.g., income taxes, unemployment

benefits).

Abel & Bernanke Ch. 8, 10 - 11 Key Macroeconomic Theories of the Business Cycle.

temporary increase

unanticipated increase

government purchasesfigure

federal government spending

aggregate supply curve

money supply contdfigure

excess supply of labor

money supplyfigure

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