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Chapter 11: Classical and Keynesian Macro Analyses

Web Links

Marginal URLs:

p. 243: Go to http://www.federalreserve.gov/releases/h15/update/ to link to Federal Reserve data on U.S. interest rates.
p. 244: Go to http://www.bea.gov/bea/dn/nipaweb/TableView.asp?SelectedTable=58&FirstYear=1999&LastYear=2000&Freq=Qtr to find out the latest U.S. saving rate from the Bureau of Economic Analysis. Select "Personal saving as a percentage of disposable personal income."
p. 257: Go to http://www.ny.frb.org/markets/foreignex.html for Federal Reserve Bank of New York data showing how the dollar's value is changing relative to other currencies.

Issues and Applications Web Resources:

To learn more about the U.S. government’s border regulations, go to the home page of the Bureau of Customs and Border Protection at http://www.customs.ustreas.gov/xp/cgov/home.xml.
For a summary of the notification requirements for international shipments established by the Trade Act of 2002, read the document available from Hogan & Hartson LLP at the link http://www.prac.org/newsletters/International_Trade_Homeland_Security.pdf.

Economics on the Net:

Money, the Price Level, and Real GDP
The classical and Keynesian theories have differing predictions about how changes in the money supply should affect the price level and real GDP. Here you get to look at data on growth in the money supply, the price level, and real GDP.

Title: Federal Reserve Bank of St. Louis Monetary Trends

Navigation: Use http://research.stlouisfed.org/publications/mt/ to visit the Federal Reserve Bank of St. Louis. Click on Gross Domestic Product and M2.

Application
Read the article; then answer these questions.

Classical theory indicates that, ceteris paribus, changes in the price level should be closely related to changes in aggregate demand induced by variations in the quantity of money. Click on Gross Domestic Product and M2, and take a look at the charts labeled "Gross Domestic Product Price Index" and "M2." Are annual percentage changes in these variables closely related?
Keynesian theory predicts that, ceteris paribus, changes in GDP and the quantity of money should be directly related. Take a look at the charts labeled "Real Gross Domestic Product" and "M2." Are annual percentage changes in these variables closely related?

For Group Study and Analysis:
Both classical and Keynesian theories of relationships among real GDP, the price level, and the quantity of money hinge on specific assumptions. Have class groups search through the FRED database (accessible at http://research.stlouisfed.org/fred/) to evaluate factors that provide support for either theory’s predictions. Which approach appears to receive greater support from recent data? Does this necessarily imply that this is the "true theory?" Why or why not?

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