Topic

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Last week, we started our discussion on aggregate demand and aggregate supply (AD/AS). The AD/AS model is useful in helping us understand how changes in the real world affect the macroeconomy through changes in GDP, unemployment and the price level.

This week we will begin by reviewing a brief economic history of the United States in the first 30 years of the twentieth century in order to shed some important light on one of the greatest economic events of the past century.

You will be introduced to the Classical view and Keynesian views of the macroeconomy. The former is based on the philosophy pertaining to how economy's of industrialized nations functioned from the time of Adam Smith in the late 18th century to the Great Depression of 1929. The latter, or Keynesian, arose as a direct challenge to the former as a result of the Great Depression.

You will learn about Keynes' views on wages, prices and interest rates, particularly during the Great Depression. In addition, you will learn about Keynes' assertions regarding consumption. His view on consumption will have us examining such topics as the average propensity to consume, the marginal propensity to consume and the spending multiplier.

Objectives

By the end of this week, you will be able to:

Identify Say's Law
Articulate the classical approach of the wage-price spiral.
Differentiate between Classical and Keynesian Economics.
Identify the causes and effects of the Great Depression of 1929, as well as the similarities in the causes and effects of the most recent global economic crisis of 2008.
Student will be able to compare and contrast various macro-economic theories of output, employment, and income
Discuss Keynes' view on wages, prices and interest rates during the Great Depression
Articulate Keynes' assertions on consumption and savings
Compute the marginal propensity to consume and the marginal propensity to save.

Weekly Schedule

Due date	Activity
	Read Textbook through Chapter 14 and Chapter 14 Appendix
	Relevant Problem Set #3 Questions
Wednesday, 11/27	Due: Quiz #8