Lectures in Macroeconomics- Charles W. Upton

Incorporating Real Business Cycles

Incorporating Real Business Cycles

A Combined Graph

PMYSLR SSR

D

Incorporating Real Business Cycles

A Drought

PMYSLR SSR

D

A drought causes a decline in productivity

Incorporating Real Business Cycles

Shift in Yf

PMYSLR SSR

D

YfYfd

Incorporating Real Business Cycles

Shift in P Curve

PMYSLR SSR

D

YfYfd

Incorporating Real Business Cycles

Shift in P Curve

PMYSLR SSR

D

YfYfd

The P curve comes about because of LS

effects, not changes in A; A shift in A will also shift

that curve

Incorporating Real Business Cycles

A Digression

PMYSLR SSR

D

YfYfd

Incorporating Real Business Cycles

Shift in Y Curve

PMYSLR SSR

D

YfYfd

Incorporating Real Business Cycles

Shift in M Curve

PMYSLR SSR

D

YfYfd

Incorporating Real Business Cycles

Equilibrium

PMYSLR SSR

D

YfYfd

Inflation

Yfd < Y < Yf

U>Un

Incorporating Real Business Cycles

The Ambiguity in R

Incorporating Real Business Cycles

The Bottom Line

PMYSLR SSR

D This is not a replacement, just a

richer model

Incorporating Real Business Cycles

End

©2006 Charles W. Upton. All rights reserved

The picture: President George W. Bush meets with the 2004 Nobel

Laureates in the Oval Office Dec. 1, 2004. Pictured with President Bush,

from left, are Dr. Linda Buck, physiology and medicine; Finn Kydland, economics; Edward

Prescott, economics; Frank Wilczek, physics; David Gross, physics; and

Richard Axel, physiology and medicine. White House photo by

Tina Hager