So this question probably says something about myself or my friends, but the other day we were arguing over the effect of a Zombie Apocalypse on AS/AD.
We agreed that as humans are infected and become zombies SRAS will shift left as the labor force diminishes. Costs of production would also rise as transportation costs rise having to avoid areas of zombie infestation. You get the idea.
Since at this point there is no cure for the virus that is at the heart of any zombie outbreak these changes in supply are likely permanent, shifting LRAS left as well.
The real argument came with the debate over whether AD shifts left, right or is indeterminate. Some argued that as humans become zombies AD would obviously shift left since zombies don't demand anything. There would also likely be quite a dent in international trade resulting from quarantines to restrict the spread of the disease. Investment would likely fall as inventories drop with looting and the unstable business environment made planning future investments problematic.
On the other hand, government expenditures might rise sharply with additional defense expenditures, rescue operations and medical research and development. In addition, those of us left would certainly demand more weaponry, canned food, kerosene, etc. - survivalist type stuff. Given this, wouldn't AD shift to the right? Or would the resulting positive changes in aggregate demand simply cancel out the negative changes in AD resulting in no real change or AD is indeterminate?
I need your help. They some don't like my answer - that SRAS and LRAS shift left and AD is indeterminate. Does AD shift? Which way? If so which happens first, the shift in AD or SRAS?
Friday, January 28, 2011
Actual vs Potential GDP Graph---We need to consume us some GDP---FAST!
Actual vs Potential GDP Graph---We need to consume us some GDP---FAST!
A close up view of the difference between the US's ACTUAL GDP and its POTENTIAL to produce GDP. The line below the Potential GDP would represent the dollar figure for a point inside the Production Possibilities Frontier, such as Point "A". The PPF just shows the raw production numbers of Capital and Consumer Goods. We have a lot of ground to make up!
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| Source: Econbrowser |
The Presidents State of the Union Address and how it relates to the Production Possibilities Frontier---I told you I could do it!!
The Presidents State of the Union Address and how it relates to the Production Possibilities Frontier---I told you I could do it!!
Here is how some of Pres. Obama's statements relate to the Production Possibilities Frontier. I highlighted the key "buzzwords" I looked out for. All suggest an Allocative Efficiency decision to allocate more resources towards "Capital Formation"--moving to the production/development of more Capital/Infrastructure to create the conditions for true economic growth. On the graph below, we first have to move from Point "A" to Point "B" on the PPF (There is no such thing as a free lunch--Opportunity Costs!), before we can experience economic growth, illustrated by a shift to the right of the PPF. Economic growth is an increase in our potential to produce more goods (and services), both Capital and Consumer Goods. Currently we are operating BELOW our potential, at a point inside our PPF. It is important to remember the distinction between GDP growth, which is what we need to just get back to the PPF, and Economic growth, which I just described above as a shift to the right, or an increase, in our productive capacity.
""Meanwhile, nations like China and India realized that with some changes of their own, they could compete in this new world. And so they started educating their children earlier and longer, with greater emphasis on math and science. They’re investing in research and new technologies. Just recently, China became home to the world’s largest private solar research facility, and the world’s fastest computer.""
We know what it takes to compete for the jobs and industries of our time. We need to out-innovate, out-educate, and out-build the rest of the world.
But after investing in better research and education, we didn’t just surpass the Soviets; we unleashed a wave of innovation that created new industries and millions of new jobs.
We’ll invest in biomedical research, information technology, and especially clean energy technology – an investment that will strengthen our security, protect our planet, and create countless new jobs for our people.
Maintaining our leadership in research and technology is crucial to America’s success. But if we want to win the future – if we want innovation to produce jobs in America and not overseas – then we also have to win the race to educate our kids.
Our infrastructure used to be the best – but our lead has slipped. South Korean homes now have greater internet access than we do. Countries in Europe and Russia invest more in their roads and railways than we do. China is building faster trains and newer airports. Meanwhile, when our own engineers graded our nation’s infrastructure, they gave us a “D.”
We have to do better. America is the nation that built the transcontinental railroad, brought electricity to rural communities, and constructed the interstate highway system. The jobs created by these projects didn’t just come from laying down tracks or pavement. They came from businesses that opened near a town’s new train station or the new off-ramp.
Over the last two years, we have begun rebuilding for the 21st century, a project that has meant thousands of good jobs for the hard-hit construction industry. Tonight, I’m proposing that we redouble these efforts.
We will put more Americans to work repairing crumbling roads and bridges. We will make sure this is fully paid for, attract private investment, and pick projects based on what’s best for the economy, not politicians.
Within 25 years, our goal is to give 80% of Americans access to high-speed rail, which could allow you go places in half the time it takes to travel by car. For some trips, it will be faster than flying – without the pat-down. As we speak, routes in California and the Midwest are already underway.
All these investments – in innovation, education, and infrastructure – will make America a better place to do business and create jobs. But to help our companies compete, we also have to knock down barriers that stand in the way of their success.
To reduce barriers to growth and investment, I’ve ordered a review of government regulations. When we find rules that put an unnecessary burden on businesses, we will fix them.
""Meanwhile, nations like China and India realized that with some changes of their own, they could compete in this new world. And so they started educating their children earlier and longer, with greater emphasis on math and science. They’re investing in research and new technologies. Just recently, China became home to the world’s largest private solar research facility, and the world’s fastest computer.""
We know what it takes to compete for the jobs and industries of our time. We need to out-innovate, out-educate, and out-build the rest of the world.
But after investing in better research and education, we didn’t just surpass the Soviets; we unleashed a wave of innovation that created new industries and millions of new jobs.
We’ll invest in biomedical research, information technology, and especially clean energy technology – an investment that will strengthen our security, protect our planet, and create countless new jobs for our people.
Maintaining our leadership in research and technology is crucial to America’s success. But if we want to win the future – if we want innovation to produce jobs in America and not overseas – then we also have to win the race to educate our kids.
Our infrastructure used to be the best – but our lead has slipped. South Korean homes now have greater internet access than we do. Countries in Europe and Russia invest more in their roads and railways than we do. China is building faster trains and newer airports. Meanwhile, when our own engineers graded our nation’s infrastructure, they gave us a “D.”
We have to do better. America is the nation that built the transcontinental railroad, brought electricity to rural communities, and constructed the interstate highway system. The jobs created by these projects didn’t just come from laying down tracks or pavement. They came from businesses that opened near a town’s new train station or the new off-ramp.
Over the last two years, we have begun rebuilding for the 21st century, a project that has meant thousands of good jobs for the hard-hit construction industry. Tonight, I’m proposing that we redouble these efforts.
We will put more Americans to work repairing crumbling roads and bridges. We will make sure this is fully paid for, attract private investment, and pick projects based on what’s best for the economy, not politicians.
Within 25 years, our goal is to give 80% of Americans access to high-speed rail, which could allow you go places in half the time it takes to travel by car. For some trips, it will be faster than flying – without the pat-down. As we speak, routes in California and the Midwest are already underway.
All these investments – in innovation, education, and infrastructure – will make America a better place to do business and create jobs. But to help our companies compete, we also have to knock down barriers that stand in the way of their success.
To reduce barriers to growth and investment, I’ve ordered a review of government regulations. When we find rules that put an unnecessary burden on businesses, we will fix them.
Ho Hum...Budget deficit for the year reaches $1.5 Trillion...Hmmm...What does that look like?
Ho Hum...Budget deficit for the year reaches $1.5 Trillion...Hmmm...What does that look like?
CBO projects U.S. budget deficit to reach $1.5 trillion in 2011, highest ever
This graphic shows what One Trillion Dollars looks like. To put the budget deficit for ONE YEAR in perspective, below you are looking at standard pallets stacked with $10,000 packs of $100 bills. Notice the average size man in the lower left-hand corner. The pallets are double stacked and the whole thing is about the size of a Walmart Store. Of course you have to add on half again to get $1.5 Trillion...Have a nice day...
This graphic shows what One Trillion Dollars looks like. To put the budget deficit for ONE YEAR in perspective, below you are looking at standard pallets stacked with $10,000 packs of $100 bills. Notice the average size man in the lower left-hand corner. The pallets are double stacked and the whole thing is about the size of a Walmart Store. Of course you have to add on half again to get $1.5 Trillion...Have a nice day...
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Wednesday, January 26, 2011
Is Atlas a Hero or an Enabler?
Was out this weekend and saw a statue of Atlas. Always makes me think of Ayn Rand's book Atlas Shrugged. Here is how John Galt sees Atlas: (btw, Atlas = taxpayer, taxpayer = YOU!)
VERY COOL population pyramid graphic from 1950 to today---Watch it change before your eyes!
VERY COOL population pyramid graphic from 1950 to today---Watch it change before your eyes!
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