1 About This Course
2 Course Contents at a Glance
3 Learning Outcomes
8 Microeconomics and Macroeconomics
9 Economic Models
13 Types of Graphs
14 Putting It Together: Economic Thinking
19 Calculating Opportunity Cost
20 The Production Possibilities Frontier
21 Productive Efficiency and Allocative Efficiency
22 Rationality and Self-Interest
23 Marginal Analysis
24 Positive and Normative Statements
27 Assignment: Guns or Butter?
36 Equilibrium, Surplus, and Shortage
37 Changes in Equilibrium
38 Finding Equilibrium
39 Changes in Supply and Demand
40 Putting It Together: Supply and Demand
41 Discussion: Supply and Demand
42 Assignment: Supply and Demand of Coffee
45 Why It Matters: Applications of Supply and Demand
47 Understanding Economics and Scarcity
48 Price Floors
51 Consumer & Producer Surplus
55 Putting It Together: Applications of Supply and Demand
57 Assignment: Price Controls After a Storm
62 Examples of Elastic and Inelastic Demand
63 Calculating Elasticity and Percentage Changes
64 Calculating Price Elasticities Using the Midpoint Formula
65 Categories of Elasticity
66 Price Elasticity of Supply
67 Income Elasticity, Cross-Price Elasticity & Other Types of Elasticities
69 Elasticity, Costs, and Customers
70 Tax Incidence
71 Putting It Together: Elasticity
72 Discussion: Junk Food and Elasticity
77 The Macroeconomic Perspective
82 Comparing Nominal and Real GDP
83 Converting Nominal to Real GDP
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Growth Accounting Studies
The Power of Sustained Economic Growth
93 Assignment: Data Project Part 1
95 Why It Matters: Unemployment and Inflation
96 Who Counts in Unemployment?
99 Cyclical Unemployment
101 The Natural Rate of Unemployment
103 Calculating Inflation with Index Numbers
104 The Consumer Price Index
105 Shortcomings of the Consumer Price Index as a Measure of the Cost of Living
107 Problems with Inflation
108 Benefits of Low Inflation
109 Putting It Together: Inflation and Unemployment
110 Discussion: How is the Economy?
111 Assignment: The State of the Macro Economy
119 Shifts in Aggregate Demand
121 Business Cycles and Growth in the AD–AS Model
123 Discussion: The Business Cycle and the AD-AS Model
125 Assignment Solution: Analysis of a Demand/Supply Shock using the AD-AS Model
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133 The Neoclassical Perspective and Potential GDP
137 Say’s Law versus Keynes’ Law
139 Balancing Keynesian and Neoclassical Models
143 Assignment: Keynesian and Neoclassical Economics
150 Finding Equilibrium Using Algebra
151 Recessionary and Inflationary Gaps in the Income-Expenditure Model
153 The Spending Multiplier in the Income-Expenditure Model
154 The Spending Multiplier and Changes in Government Spending
155 Putting It Together: The Income-Expenditure Model
157 Assignment: The Income-Expenditure Model
160 Why It Matters: Fiscal Policy
162 Government Spending
163 State and Local Government Spending
165 Federal Budgets and National Debt
167 Automatic Stabilizers
169 Neoclassical Fiscal Policy and Supply-Side Economics
170 Fiscal Policy, Investment, and Crowding Out
171 Putting It Together: Fiscal Policy
176 Why It Matters: Money and Banking
177 Defining Money by Its Functions
178 Measuring Money: Currency, M1, and M2
180 Financial Markets and Assets
181 Financial Markets, Supply and Demand, and Interest
183 Banking Assets and Liabilities
184 How Banks Create Money
188 Assignment Solution: Baby Boomers
190 Why It Matters: Monetary Policy
191 Banks, Loan Finance, and the Payments System
192 The Federal Reserve System and Central Banks
194 Monetary Policy and Open Market Operations
196 Monetary Policy and Aggregate Demand
199 Putting It Together: Monetary Policy
204 Why It Matters: Policy Applications
205 Viewpoints on Government Policy
206 The Phillips Curve
209 Ricardian Equivalence
212 Policy Implications: Supply Shocks and Economic Growth
213 Putting It Together: Policy Application
214 Discussion: Macropolicy
218 Why It Matters: Globalization and International Trade
222 Demand and Supply Analysis of International Trade
223 Protectionism
232 Why It Matters: Exchange Rates and International Finance
234 Strengthening and Weakening Currency
235 Macroeconomic Effects of Exchange Rates
239 Discussion: Global Currencies
241 Assignment Solution: Exchange Rates and International Finance
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188 Assignment Solution: Baby Boomers
188 Assignment Solution: Baby Boomers
Solution
This problem asks students to apply the theory of supply and demand to financial markets as is done in this module. Mid-career workers tend to have a high saving rate, while retirees do not. An exodus of Baby Boomers from work to retirement will lower their saving rate. Since the Baby Boomers are a lower than average demographic cohort, they will not be replaced by the same number of entry level workers. As a consequence, the average U.S. saving rate should fall. We can show this by a leftward shift in the supply of financial capital, which will raise the equilibrium saving rate.