tailieunhanh - Lecture Macroeconomics: Lecture 20 - Prof. Dr.Qaisar Abbas

Lecture 20 - Advances in business cycle theory. This chapter presents the following content: The theory of real business cycles, shocks in the crusoe island economy, economic fluctuations as optimal responses to shocks, the labor market, technology shocks,. | Review of the previous lecture Advocates of active monetary and fiscal policy view the economy as inherently unstable and believe policy can be used to offset this inherent instability. Critics of active policy emphasize that policy affects the economy with a lag and our ability to forecast future economic conditions is poor, both of which can lead to policy being destabilizing. Advocates of rules for monetary policy argue that discretionary policy can suffer from incompetence, abuse of power, and time inconsistency. Critics of rules for monetary policy argue that discretionary policy is more flexible in responding to economic circumstances. Review of the previous lecture Advocates of a zero-inflation target emphasize that inflation has many costs and few if any benefits. Critics of a zero-inflation target claim that moderate inflation imposes only small costs on society, whereas the recession necessary to reduce inflation is quite costly. Advocates of reducing the government debt . | Review of the previous lecture Advocates of active monetary and fiscal policy view the economy as inherently unstable and believe policy can be used to offset this inherent instability. Critics of active policy emphasize that policy affects the economy with a lag and our ability to forecast future economic conditions is poor, both of which can lead to policy being destabilizing. Advocates of rules for monetary policy argue that discretionary policy can suffer from incompetence, abuse of power, and time inconsistency. Critics of rules for monetary policy argue that discretionary policy is more flexible in responding to economic circumstances. Review of the previous lecture Advocates of a zero-inflation target emphasize that inflation has many costs and few if any benefits. Critics of a zero-inflation target claim that moderate inflation imposes only small costs on society, whereas the recession necessary to reduce inflation is quite costly. Advocates of reducing the government debt argue that the debt imposes a burden on future generations by raising their taxes and lowering their incomes. Critics of reducing the government debt argue that the debt is only one small piece of fiscal policy. Review of the previous lecture Advocates of tax incentives for saving point out that our society discourages saving in many ways such as taxing income from capital and reducing benefits for those who have accumulated wealth. Critics of tax incentives argue that many proposed changes to stimulate saving would primarily benefit the wealthy and also might have only a small effect on private saving. Lecture 20 Advances in Business Cycle Theory Instructor: Prof. Dr. Qaisar Abbas 3 This chapter sets up the IS-LM model, which chapter 11 then uses extensively to analyze the effects of policies and economic shocks. This chapter also introduces students to the Keynesian Cross and Liquidity Preference models, which underlie the IS curve and LM curve, respectively. If you would like to spend