Macro Economics

The real driver behind the Housing Bubble, current Unemployment, and the rise (and fall) of American economic supremacy

Prof. Jeff Takle(857) 277-9050 | jeff.takle@gmail.com

Measuring an EconomyTake what we’ve learned so far, and start applying it to a national economy

Calculate the Real GDP per capita

Calculate the Real GDP 2006 2007 2008

Consumer Price Index (CPI) base 1982 201.6 207.3 215.3

Nominal GDP (in trillions) $13.1 $13.8 $14.2

Real GDP (in 1982 terms)

Number of citizens (in millions) 298 301 304

Real GDP per capita

CPI of 201.6 = 201.6% the price level of base year (1982) = 2.016Use the following equation: Real GDP = Nominal GDP / CPI

$6.5 $6.7 $6.6

Did Real GDP go “up” or “down” from 2007 – 2009?

$21,812

$22,259

$21,170

Real GDP over the Last 80 Years

Economic IndicatorsLeading, coincident, and lagging

Leading Indicators

1900 2010

380 42 = 89%

13,930 7,062 = 49%

Coincident Indicators

Lagging IndicatorsFederal Interest Rate

Aggregate Supply & Demand for an EconomyPretty close to what we already learned, but for “countries”

Aggregate Supply & Demand

Real GDP

(trillions of 2000 dollars)0 2 4 6 8 10 12 14 16

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Supply and Demand Curves are Shifting

Government Policies & Their Effects on the EconomyCan you feel the excitement?

2min 40sec

http://www.youtube.com/watch?v=UHes9WgieIo

Demand-side Economics

Real GDP

(trillions of 2000 dollars)0 2 4 6 8 10 12 14 16

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The Democratic Party generally supports “demand-side” economics, using government spending to artificially increase demand, prices, and GDP.

What’s the cost/risk?

Supply-side Economics

Real GDP

(trillions of 2000 dollars)0 2 4 6 8 10 12 14 16

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The Republican Party generally supports “supply-side” economics, using tax cuts to spur production, decrease prices, and increase GDP.

What’s the cost/risk?

Demand-side versus Supply-side

Which one is better?

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