By Edward E. Leamer
This ebook deals the knowledge and perception concerning the US economic climate from a widely known and distinct econometrician who chanced on himself first educating macro economics to MBAs after which Directing the highly-regarded and widely-quoted UCLA/Anderson Forecast which supplies quarterly forecasts for the united states economic climate. Edward Leamer argues that "We are pattern-seeking story-telling animals." He presents during this e-book the styles and tales which are the foundation for his figuring out of what determines the enterprise cycle and what determines long-run fiscal development.
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Additional info for Macroeconomic Patterns and Stories: A Guide for MBAs
It is not consumption; the investment. As a share of GDP, investment is the component that varies the most. Investment is a rising share of GDP when investment spending is driving the growth; it is a falling share of GDP when investment spending is slowing the growth. Do not be too quick to draw conclusions here. This is just a start. Investment includes spending on new homes and remodeling. Homes could be the driver. It could also be that small changes in consumption spending C could be enormously amplified by swings in business investment.
Why use 1996 prices as the base year? As far as I know, that is entirely accidental. This base year changes over time, keeping pretty close to the current year. That makes sense because we want to use prices with which we are most familiar to value GDP. Other than recency, there is not any special reason for the choice of base year. Does the choice of the base year matter? This question has two answers: Yes and NO. Start with No first. Take a look at the chart above that compares real GDP and GDP.
Lean inventories and low ratios of inventories to sales work fine in a stable economy, but not well in a volatile one. New Economy advocates in the mid 1990s were promising steady growth forever and indeed there was a significant decline in volatility, which can be seen in Fig. 7. But for Cisco in 1999, inventories that were planned to be “just-in-time” turned out “way too early” when sales of routers and servers dropped dramatically and inventories built up. 0. 0? 1% (1 in a 1000). Are recessions a thing of the past?