Chapter 6: Economic growth, business cycles, and structural stagnation. After reading this chapter, you should be able to: Discuss the history of macro, distinguishing Classical and Keynesian, macroeconomists; define growth and discuss its recent history; distinguish a business cycle from structural stagnation; relate unemployment to business cycles and distinguish cyclical unemployment from structural unemployment. | Economic Growth, Business Cycles, and Structural Stagnation Remember that there is nothing stable in human affairs; therefore avoid undue elation in prosperity, or undue depression in adversity. — Socrates Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter Goals Discuss the history of macro, distinguishing Classical and Keynesian macroeconomists Distinguish a business cycle from structural stagnation Define growth and discuss its recent history Relate unemployment to business cycles and distinguish cyclical unemployment from structural unemployment 2 The Historical Development of Macro Classical economists believe that business cycles are temporary glitches, and generally favor laissez-faire, or nonactivist policies Keynesian economists believe that business cycles reflect underlying problems that can be addressed with activist government policies By the 1980s, Classical and Keynesian economics merged in a new conventional macroeconomics | Economic Growth, Business Cycles, and Structural Stagnation Remember that there is nothing stable in human affairs; therefore avoid undue elation in prosperity, or undue depression in adversity. — Socrates Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Chapter Goals Discuss the history of macro, distinguishing Classical and Keynesian macroeconomists Distinguish a business cycle from structural stagnation Define growth and discuss its recent history Relate unemployment to business cycles and distinguish cyclical unemployment from structural unemployment 2 The Historical Development of Macro Classical economists believe that business cycles are temporary glitches, and generally favor laissez-faire, or nonactivist policies Keynesian economists believe that business cycles reflect underlying problems that can be addressed with activist government policies By the 1980s, Classical and Keynesian economics merged in a new conventional macroeconomics Following the 2008 crash, the . economy experienced structural stagnation that conventional economists did not anticipate Two Frameworks: The Long Run and the Short Run The long-run growth framework focuses on incentives for supply Sometimes called supply-side economics Issues of growth are considered in a long-run framework The short-run business cycle focuses on demand Sometimes called demand-side economics Business cycles are generally considered in a short-run framework Inflation and unemployment fall within both frameworks 4 Two Frameworks: The Long Run and the Short Run The stark division between the short-run and the long-run frameworks is problematic Both frameworks have to be blended into a composite framework in which both supply and demand influence long-run and short-run forces The long run is just a combination of short runs that cannot be separated The economy is simultaneously in the long run and short run 5 Growth Economists measure growth with changes in total .
