forum
Schaefer, Chapter 7 “The Making of African Americans in a White America”, pp. 174-192
Richard T. Schaefer, Racial and Ethnic Groups, Thirteenth, [Boston: Pearson, 2012] [ISBN: 125625482]
You must write a three-page analytical summary of the assigned readings highlighting the followings: a. What is the author’s argument? b. What is the author’s objective? c. Is the author convincing? d. Do you agree with the author? i. If yes, why? ii. If no, what is missing from the narrative? e. What is your opinion on the topic/issue/argument? B. Questions: If you have any questions on the assigned reading assignments or on anything related to topic, you should write those at the end of your summary. Your reviewer will try to answer those questions. I will provide my views as well.
1. PGDP:
Changes in Potential GDP
When potential GDP increases, both the LAS and SAS curves shift rightward.
Potential GDP changes for three reasons:
? An increase in the full-employment quantity of labor changes
? An increase in the quantity of capital (physical or human) changes
? An advance in technology
2. RGDP
Chapter 28:
1. Which components of aggregate expenditure are influenced by real GDP?
-The components of aggregate expenditure sum to real GDP.
That is,
Y = C + I + G + X – M
The components of aggregate expenditure that influenced by real GDP are Planned consumption expenditure and planned imports.
3-What is the relationship between aggregate planned expenditure and real GDP at equilibrium expenditure?
The relationship is equal between the aggregate planned expenditure and the real GDP at Equilibrium expenditure.
The relationship between aggregate planned expenditure and real GDP can be described by an aggregate expenditure schedule, which lists the level of aggregate expenditure planned at each level of real GDP.
The relationship can also be described by an aggregate expenditure curve, which is a graph of the aggregate expenditure schedule.
+Equilibrium expenditure is the level of aggregate expenditure that occurs when aggregate planned expenditure equals real GDP
7. How does an increase in autonomous expenditure change the real GDP..
1. – An increase in real GDP increases aggregate expenditure.
2. – An increase in aggregate expenditure increases real GDP.
3. MPC& MPS
Chapter 28:
2. Define and explain how we calculate the MPC and MPS?
–The marginal propensity to consume (MPC) is the fraction of a change in disposable income spent on consumption.
It is calculated as the change in consumption expenditure, DC, divided by the change in disposable income, DYD, that brought it about.
That is, MPC = DC÷ DYD
–The marginal propensity to save (MPS) is the fraction of a change in disposable income that is saved.
It is calculated as the change in saving, DS, divided by the change in disposable income, DYD, that brought it about.
That is,
MPS = DS ÷ DYD
The MPC plus the MPS equals 1
Or MPC + MPS = 1
5. How do MPC, marginal propensity to import, and the income tax influence the multiplier?
When there are no income taxes and no imports, the slope of the AE curve equals the marginal propensity to consume, so the multiplier is
Multiplier = 1 ÷ (1 – MPC).
But 1 – MPC = MPS, so the multiplier is also
Multiplier = 1 ÷ MPS.
4. MULTIPLIER & howis to determined
4. What is the multiplier? What does it determine? Why does it matter?
The multiplier is the amount by which a change in autonomous expenditure is magnified or multiplied to determine the change in equilibrium expenditure and real GDP.
.
When autonomous expenditure changes, so does equilibrium expenditure and real GDP.
But the change in equilibrium expenditure is larger than the change in autonomous expenditure.
The multiplier is the amount by which a change in autonomous expenditure is magnified or multiplied to determine the change in equilibrium expenditure and real GDP
-The Basic Idea of the Multiplier
An increase in investment (or any other component of autonomous expenditure) increases aggregate expenditure and real GDP.
The increase in real GDP leads to an increase in induced expenditure.
The increase in induced expenditure leads to a further increase in aggregate expenditure and real GDP.
So real GDP increases by more than the initial increase in autonomous expenditure.
5. Fiscal policy
Ch 30Q1: What is fiscal policy, who makes it, and what is it designed to influence?
Fiscal policy is the use of the federal budget to achieve macroeconomic objectives, such as full employment, sustained economic growth, and price level stability.
Generational accounting is an accounting system that measures the lifetime tax burden and benefits of each generation.
Fiscal imbalance is the present value of the government’s commitments to pay benefits minus the present value of its tax revenues.
Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation’s economy.
Q4: What is the distinction between automatic and discretionary fiscal policy?
Automatic fiscal policy is a fiscal policy action triggered by the state of the economy with no government action.
Discretionary fiscal policy is a policy action that is initiated by an act of Congress.
6. Fiscal policy ,monetary policy
(c)Fiscal policy is the government’s attempt to influence the economy by setting and changing taxes, making transfer payments, and purchasing goods and services.
An increase in disposable income increases consumption expenditure and increases aggregate demand.
(d)Monetary policy is changes in interest rates and the quantity of money in the economy.
A cut in interest rates increases expenditure and increases aggregate demand.
7. Cost-push and DD-pull Inflation
a-demand-pull inflation
An inflation that starts because aggregate demand increases is called demand-pull inflation.
Demand-pull inflation can begin with any factor that increases aggregate demand.
Examples are a cut in the interest rate, an increase in the quantity of money, an increase in government expenditure, a tax cut, an increase in exports, or an increase in investment stimulated by an increase in expected future profits.
b-cost-push inflation
An inflation that starts with an increase in costs is called cost-push inflation.
There are two main sources of increased costs:
1. An increase in the money wage rate
2. An increase in the money price of raw materials, such as oil
8. -Stag-flationQ, U, P )
Ch29
What is stagflation and why does cost-push inflation cause stagflation?
The combination of a rising price level and a decreasing real GDP is called stagflation.
Cost-push inflation occurred in the United States during the 1970s when the Fed responded to the OPEC oil price rise by increasing the quantity of money.
9. Short –run & long-run
Ch27
4- What is meant by:
(a) – Short-run aggregate supply is the relationship between the quantity of real GDP supplied and the price level when the money wage rate, the prices of other resources, and potential GDP remain constant.
The short-run aggregate supply curve (SAS) is upward sloping.
– Long-run aggregate supply is the relationship between the quantity of real GDP supplied and the price level when real GDP equals potential GDP.
So the long-run aggregate supply curve (LAS) is vertical at potential GDP
(b)Aggregate demand is the relationship between the quantity of real GDP demanded and the price level.
10. -Aggregate dd&ss(factor s influencing them)
(b)Aggregate demand is the relationship between the quantity of real GDP demanded and the price level.
The aggregate demand curve (AD) plots the quantity of real GDP demanded against the price level.
Changes in Aggregate Demand
A change in any influence on buying plans other than the price level changes aggregate demand.
The main influences on aggregate demand are
? Expectations
? Fiscal policy and monetary policy
? The world economy
ssThequantity of real GDP supplied is the total quantity that firms plan to produce during a given period.
Aggregate supply is the relationship between the quantity of real GDP supplied and the price level.
We distinguish two time frames associated with different states of the labor market:
? Long-run aggregate supply
? Short-run aggregate supply
-Changes in Aggregate Supplyss
Aggregate supply changes if an influence on production plans other than the price level changes.
-These influences include
? Changes in potential GDP
? Changes in money wage rate (and other factor prices)
2- List factor that will change the aggregate demand (SAMETHE changes)
Buying plans depend on many factors and some of the main ones are:
-The price level
-Expectations
– Fiscal policy and monetary policy
-The world economy
11. Balanced budget ( G=T )
balanced budget.
The projected budget deficit in fiscal 2011 is $1,322 billion.
12. Laffer curve( % T to income)
The relationship between the tax rate and the amount of tax revenue collected is called theLaffer curve.
13. Fed fund rate
CH31
Federal funds rate—the interest rate at which banks borrow monetary base overnight from other banks.
Q4-By the balance of the supply and demand for the funds. But in fluctuates. A target rate is set by the federal open market committee but the actual rate that’s used overnight can be higher or lower, depending on supply of funds and the demand by banks for loans.
14. Criticism of RBC theory
Criticisms and Defenses of RBC Theory
The three main criticisms of RBC theory are that
1. The money wage rate is sticky, and to assume otherwise is at odds with a clear fact.
2. Intertemporal substitution is too weak a force to account for large fluctuations in labor supply and employment with small real wage rate changes.
3. Productivity shocks are as likely to be caused by changes in aggregate demand as by technological change.
15. Automatic &discretnorary fiscal policy
++A fiscal stimulus is the use of fiscal policy to increase production and employment.
Fiscal stimulus can be either
? Automatic
? Discretionary
Automatic fiscal policy is a fiscal policy action triggered by the state of the economy with no government action.
Discretionary fiscal policy is a policy action that is initiated by an act of Congress.
16. Lag time of discretionary
Time Lags
The use of discretionary fiscal policy is seriously hampered by three time lags:
? Recognition lag—the time it takes to figure out that fiscal policy action is needed.
? Law-making lag—the time it takes Congress to pass the laws needed to change taxes or spending.
? Impact lag—the time it takes from passing a tax or spending change to its effect on real GDP being felt.
17. Short-run & long-run Phillips curve
c- short run and long run Phillips curve?
-The short-run Phillips curve shows the tradeoff between the inflation rate and unemployment rate, holding constant
1. The expected inflation rate
2. The natural unemployment rate
-The long-run Phillips curve shows the relationship between inflation and unemployment when the actual inflation rate equals the expected inflation rate.
18. Monetary policy instrument
The monetary policy instrument is a variable that the Fed can directly control or closely target.
+The amount by which real GDP is less than potential GDP is called a recessionary gap.
The amount by which potential GDP exceeds real GDP is called ainflationary gap.
=
Output Gap
If the output gap is positive, an inflationary gap, the inflation rate will most like accelerate.
The Fed might consider raising the federal funds rate.
If the output gap is negative, a recessionary gap, inflation might ease.
The Fed might consider lowering the federal funds rate.
inflationary
