Macro 11

2. Lecture 11
Macroeconomics

3. Opening
Prayer

4. Quiz Master

5. Chapter 12
In
fl
ation and the
Quantity Theory of
Money

6. Quantity Theory of Money
M = Money Supply
v = velocity
P = Price Level
YR = Real GDP

7. v = velocity
The average number of times
a dollar is used to purchase
fi
nal goods and services
within a year

8. Mv = PYR
Assume v andYR are
constant
M = P

9. M = P
In
fl
ation is
everywhere and
always a monetary
phenomenon
Milton Friedman

11. Chapter 13
Aggregate Demand
Aggregate Supply
Model
AD-AS Model

12. Model
A way to understand how
things work
Models change
Reality doesn't

13. Chart
A way to illustrate logic and
data

14. Aggregate Demand
Why do people want to buy
things?

15. In
fl
ation
Rate
P
π
AD
Real GDP Growth Rate Y
Shift Left - Decreasing Demand
Slower Money Supply Growth
(higher interest rates)
Fear
Reduced Wealth
Higher Personal Taxes
Lower Government Spending
Decreased Export Growth
Increased Import Growth
Shift Right - Increasing Demand
Faster Money Supply Growth (lower interest rates)
Con
fi
dence
Increased Wealth
Lower Personal Taxes
Higher Government Spending
Increased Export Growth
Decreased Import Growth

16. Aggregate Supply
a function of all of your
capitals

17. What is capital?
anything you can use to
create value

18. Supply
No matter the price
you can only produce
so much

19. Real GDP Growth Rate
In
fl
ation
Rate
π
LRAS
Shift Left - Losing Capitals
Bad weather
Higher oil price
Tech slump
Higher business taxes or regulations
War, Earthquake, Pandemic
Shift Right - Gaining Capitals
Good weather
Lower Oil Price
Tech boom
Lower business taxes or regulation
Smooth production