EC4004 Lecture 6 Stephen Kinsella www.stephenkinsella.net Markets and the Macroeconomy III The Business Cycle
EC4004 2008 Lecture6 Equilibrium Business Cycles
Jun 23, 2015
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EC4004 Lecture 6
Stephen Kinsellawww.stephenkinsella.net
Markets and the Macroeconomy IIIThe Business Cycle
Last TimeMarkets -> MacroeconomyIntertemporal Sub. Effect
Message: Households Respond over time to changes in interest
rates
This Time: Business Cycles
Definition
A non repeating pattern of economic growth and contraction about a trend.
Model
US Data
US Data
Irish Data
5 10 15 20 25 30 35
22.5
23.0
23.5
24.0
24.5
25.0
25.5Log Consumption !blue" and GDP !red" in Ireland, 1970!2006
Irish Data
1970 1980 1990 20000
2.!1010
4.!1010
6.!1010
8.!1010
1.!1011
1.2!1011
Total Consumption !blue" and GDP !red" in Ireland, 1970"2006
Real income is:
a.wL + i(B+K)
b.(w/P)L + i((B/P)+(K/P))
c.(w/P)L + i((B/P)+ K)
d.(w/P)L + i(B+ K)
086 399 83 06
If the household opts to consume all its income it will be at point:
a. F
b. G
c. H
d. I
086 399 83 06
086 399 83 06
Next Time
Barro Chapter 9.SULIS Tests
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