MACRO economics

• Wont
• Inflation
• Currency

• Money Supply ^{_{(Then money supply should grow by 3% as well)}} = GDP ^{_{(IF 3% economy grew)}}
• Unless Rule of Scarcity is presnt

• Believe in:
• GOV & Consumer spending
• GOV to plan the economy
• _{Raising/Cutting Gov Spending = Manage Business cycles}
• Cuting taxes – Lowering interest rates – expanding money supply (credit)
• Spend $ we don’t have/borrow
• Fiscal policy > vs Monetary policy
• DO NOT INTRODUCE FEAR

1930s-1980s

• -Believe that the economy could be better managed if the GOV followed some simple rules.
• -1970s

• Believe in:
• GOV is to be kept at a minimum.
• GOV must support private property rights and not interfere with private sectors.

• -1920s
• -F.A. Hayek promoted this school of thought

• -Believe that $ supply, interest rates and banking rates….  
•  - Came up with Money supply growth =GDP (formula)  
•  -Federal reserve did not cover when the banks failed and people lost life savings

(1960s – current) (Milton Friedman)

(1980s – Present)

• Increases in:
• Consumption spending
• Investment spending
• Govt. Spending
• Lower Taxes
• Exports > Imports
• Spending Multiplier

• Decrease in:
• Consumption spending
• Investment spending
• Govt. Spending
• Lower Taxes
• Exports < Imports
• Spending Multiplier

Economy Equilibrium

Is where there is only a limited level of aggregate supply and then there is a spike in aggregate demand.

• Ex: GOV may bid up the price of the limited steel supply for example vs a car company wantng the same steel.
• RASING PRICES / CAUSING IINFLATION

When something makes ur supply or ability to make things GO DOWN.

• 1973
• 1979
• 1990

When government gives you $$ and you didn’t do no direct job to earn that money.

Example: Student grant (do not have to pay it back) – Social Security (elderly do not have to pay back debt) –

GDP

• 1776 - 1930
• Classical Economics

• Reduce govt spending
• Cut Taxes
• Create huge Govt. Programs

Macroeconomics

<sub>^{FDIC Federal Deposit Insurance Corporation – With over 9000 bank failures, this was vital to restore confidence in the banking system}.

<sup>SEC - Securities & Exchange Commission – The illogical and casino atmosphere of the stock market was replaced by a more orderly system of reforms that led to a more disclosure & above-board practices

Glass Steagall Act (1933)</sup> - ^{This new law made it illegal for banks to put depositor money at risk in the stock market. Essentially, it separated banking activities from stock market activities such as investment banking. This law was repealed in 1999 causing recent economic disaster.}</sub>

• 10%
• Month

• FDR............
• raised tax rate from 24% - 64%
• Then again from 64% - 79%

NRA Set Price Ceilings ^{_{(low prices)}}cause shortage

Undistributed Profit Tax - ^{_{Business could not keep their profits. They had to distribute their profits as dividends or salaries or face surtax penalties as high as 70%}}

Business could not keep their profits. They had to distribute their profits as dividends or salaries or face surtax penalties as high as 70%

• NRA set price ceilings (low prices) which leave to shortages.
• If discounts were offered, seller would be jailed or faced penalties.

You owe money but you don’t have the resources of coming up with it.

Ex: Gov programs: Social Security Liability, Prescription Drug Liability, Medicare Liability = US Unfunded Liabilities.

Ex of person to bank:  Debt = 100,000 / Income (GDP) 100,000

Ex of gov to GDP:   Debt = 177billion / GDP = 177billion

The GDP has to be shrinking for a duration of at least 6 months

The GDP has to be GROWING for a duration of at least 6 months

• 10
• or 13.6% of the time