Chap018 4 (2010)

Global Macro Pay Attention – Not in book

International Trade ,[object Object],[object Object],LO1

Imports as Leakage ,[object Object],[object Object],[object Object],LO1

Imports as Leakage ,[object Object],[object Object],LO1

Imports as Leakage ,[object Object],C + I + G = Y LO1

Imports as Leakage ,[object Object],C + I + G + X = Y + M ,[object Object],LO1

Marginal Propensity to Import ,[object Object],[object Object],[object Object],LO1

Imports and the Multiplier Effect ,[object Object],[object Object],LO1

Imports and the Multiplier Effect ,[object Object],[object Object],[object Object],LO1

Imports and the Multiplier Effect ,[object Object],LO1

Imports and the Multiplier Effect ,[object Object],LO1 Cumulative change in aggregate demand = Initial change in spending Income multiplier x

Imports Reduce Multiplier Effects Induced C in closed economy Induced C in open economy AS AD 1 AD 2 AD 3 AD 4 LO1 Real Output (Income) (dollars per time period) Price Level (average price) Fiscal injection

Global Stabilizer ,[object Object],[object Object],LO2

Exports as Injections ,[object Object],[object Object],[object Object],LO2

Trade Imbalances ,[object Object],[object Object],LO2

Trade Imbalances ,[object Object],C + I + G + (X - IM) = Y LO2

Trade Imbalances ,[object Object],LO2

Macro Effects ,[object Object],[object Object],[object Object],LO2

Crowding Out Net Exports ,[object Object],[object Object],LO2

Foreign Perspectives ,[object Object],[object Object]

Foreign Perspectives ,[object Object]

A Policy Constraint ,[object Object],[object Object],[object Object],[object Object],LO2

International Finance ,[object Object],[object Object]

Capital Inflows ,[object Object],[object Object],[object Object]

Capital Outflows ,[object Object],[object Object],[object Object]

Capital Outflows ,[object Object]

Capital Imbalances ,[object Object],[object Object]

Macro Effects ,[object Object],LO3

Exchange Rates ,[object Object],[object Object],LO3

Capital Flows: Another Policy Constraint ,[object Object],[object Object],[object Object],[object Object],LO3

Productivity and Competitiveness ,[object Object]

Specialization ,[object Object],[object Object]

Specialization ,[object Object]

Competitiveness ,[object Object],[object Object]

Global Coordination ,[object Object]

IMF ,[object Object],[object Object]

Group of Eight ,[object Object],[object Object]

A Global Currency? ,[object Object]

The New Euro ,[object Object],[object Object]

Macro Coordination ,[object Object],[object Object]

Theory versus Reality ,[object Object],[object Object],[object Object],[object Object]

Fiscal Policy ,[object Object],[object Object]

Who Makes Fiscal Policy? ,[object Object],[object Object]

Who Makes Fiscal Policy? ,[object Object],[object Object],LO1

Monetary Policy ,[object Object],[object Object],[object Object],[object Object],[object Object]

Monetary Policy ,[object Object],[object Object]

Who Makes Monetary Policy? ,[object Object],[object Object]

Monetary Policy ,[object Object],[object Object],LO1

Supply-Side Policy ,[object Object],[object Object]

Who Makes Supply-Side Policy? ,[object Object],[object Object]

Idealized Uses ,[object Object],[object Object]

Case 1: Recession ,[object Object],[object Object],[object Object]

Case 1: Recession ,[object Object],[object Object],[object Object],[object Object]

Case 2: Inflation ,[object Object],[object Object],[object Object]

Case 2: Inflation ,[object Object],[object Object]

Case 3: Stagflation ,[object Object],[object Object],[object Object]

Case 3: Stagflation ,[object Object],[object Object],[object Object],[object Object]

Fine-Tuning ,[object Object],[object Object],[object Object]

The Economic Record ,[object Object],Source: Economic Report of the President, 2009 and Congressional Budget Office

Why Things Don’t Always Work ,[object Object],[object Object],[object Object],[object Object],[object Object]

Goal Conflicts ,[object Object],[object Object],[object Object],[object Object]

Goal Conflicts ,[object Object],[object Object],[object Object],[object Object],Provide aid To Foreign Country Increase expenditures For Elderly in county

Measurement Problems ,[object Object],[object Object],[object Object]

Forecasts ,[object Object],[object Object]

Leading Indicators and Crystal Balls ,[object Object],[object Object],[object Object],[object Object]

Policy and Forecasts ,[object Object],External shocks Budget projections Policy decisions Economic forecasts

External Shocks ,[object Object],[object Object]

Design Problem ,[object Object],[object Object],[object Object]

Implementation Problems ,[object Object],[object Object],[object Object]

Time Lags ,[object Object],Delay Delay Delay Delay Problem emerges Policy impact noticeable Problem recognized Response formulated Action taken

Economic Policy Delays There is a period of time from when an economic problem emerges until it can be recognized. Once it is recognized, it takes time to design a policy response and time for the policy to be implemented. By the time the policy has an impact on the economy the economic situation may have changed, and the action may propel the economy in the wrong direction. Economic Problem Emerges. Economic Problem Recognized. Design Policy. Implement Policy. Economic Situation Changed. Economy Propelled in Wrong Direction.

Politics vs. Economics ,[object Object],[object Object],[object Object]

Hands On or Hands Off? ,[object Object],[object Object]

New Classical Economics ,[object Object],LO3

New Classical Economics ,[object Object],[object Object],LO3

New Classical Economics ,[object Object],[object Object],[object Object],LO3

Modest Expectations ,[object Object],[object Object],[object Object],[object Object],[object Object],LO3

Theory and Reality End of Chapter 19

Chap018 4 (2010)

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