Kuliah IV Business Fluctuation

7/31/2019 Kuliah IV Business Fluctuation

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BUSINESS FLUCTUATIONS AND THE

THEORY OF AGGREGATE DEMAND

A. Business Fluctuations

- Features of The Business Cycle

- Business Cycle Theories

Exogenous vs Internal Cycle

Demand Induced Cycle-Forcasting Business cycle

Econometric Modeling and Forcasting


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B. Foundations of Aggregate Demand

- Downward Sloping Aggregate DemandCurve

Shifts in Aggregate Demand

- Relative Importance of Factors InfluencingDemand

Is The Business Cycle Avoidable


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BUSINESS FLUCTUATIONS AND THETHEORY OF AGGREGATE DEMAND

A. Business Fluctuations

The lessons of Keynesian Economics is thatchanges in aggregate demand can have apowerful impact on the overall level of output,employment, and prices in the short run.

Upward and downward movements in output,inflation, interest rates, and employment formthe business cycle that characterizes all marketeconomies.


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Investasi

Fiscal

Policy

Internation

al tradeIntercection

AD dan AS

AS

ADOutput


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Features of The Business Cycle

Siklus bisnis artinya fluktuasi dalam total output

nasional, employment, pendapatan yang umumnya

terjadi pada 2 sampai 10 tahun, yang ditandai oleh

kontraksi atau ekspansi dalam sektor-sektor ekonomi

Ahli-ahli ekonomi membagi BC ke dalam dua phase

utama yaitu: resesi dan ekspansi

Resesi adalah periode penurunan dalam total output,

income, dan employment umumnya 6 bulan sampai1 tahun dan ditandai oleh kontraksi dalam beberapa

sektor


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peak

Trough

peak

Trough

peak


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Business-cycle Theories

Sumber-sumber bisnis dibagi atas dua:

Exogenus dan Internal

Eksogenus berarti fluktuasi ekonomidisebabkan dari luar sistem perekonomian

misalnya; perang, revolusi, dan election,

migrasi, harga minyak, inovasi teknologi,

cuaca.

Faktor Internal sangat terkait dengan

multiplier-accelerator theory.


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lanjutan

Permintaan penyebab siklus (Demand-induced cycle)

Fluktuasi Siklus bisnis dalam output,employment dan harga disebabkan olehpergeseran dalam AD

AD bergeser ke kanan menunjukkan inflasi

AD bergeser ke kiri menunjukkan resesi


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Foundations of Aggregat

Demand (AD)Aggregat Demand is the total or

aggregate quantity of output that is

willingly bought at a given level ofprices, other things held constant.

AD is the desired spending in all

product sectors: consumption, privateinvestment, government purchases of

goods and services and net exports


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Downward Sloping AD Curve

Ini berarti bahwa sesuatu lainnya konstan, makatingkat pengeluaran riil menurun sebagaimanatingkat harga keseluruhan dalam perekonomian

meningkatAlasan mengapa slope menurun karena: adabeberapa elemen pendapatan atau kekayaan yangtidak meningkat ketika tingkat harga meningkat.Misalnya; transfer payment, upahminimum, pensiun

semua ditetapkan dalam bentuk nominal. Jika Ppendapatan disposible riil menurunpengeluaran konsumsi .


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lanjutan

Beberapa elemen kekayaan mungkin tetapdalam bentuk nominal. Misalnya; memeganguang dan saham yang umumnya sudah

ditetapkan nilai dalam satu tertentu. Jika harganaik, maka nilai ril kekayaan menurun.

Pengeluaran riil turun pada tingkat harga yangtinggi karena efek tingkat harga tinggi

mempengaruhi pendapatan riil, kekayaan riil danreal money supply.


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Pergeseran sepanjang AD

Disebabkan olehperubahan tingkat harga

Misal: tingkat harga tinggi

dengan jumlah uangberedar nominal tetapmenunjukkan pengetatanuang, tingkat bunga tinggi,dan penurunan

pengeluaran terhadapinvestasi dan konsumsi.

B

C

AD


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Business fluctuation in output, employment and

prices often caused by shiftsin aggregate

demand. These occurs as consumers, business

and governments change total spending relative

to the economys productive capacity. When

these shilfts in AD lead to sharp businessdownturns, the economy suffers recessions or

even depressions. A sharp upturn ini economic

activity can lead to inflation.


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Business Cycles Theories

1. Monetary theoriesattributes business fluctuationsto the expansions and contractions of money and

credit.

Monetary factors are the primary source of

fluctiation in aggregate demand.( M. Friedman)

2. The multiplier-accelerator modelpropose thatexogenous shocks are propagated by multiplier

mechanism.

Thes theory shows how the interaction of multiplier

and accelerator can lead to regular cycles inaggregate demand ( P. Samuelson)


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3. Political theories of business cycles attributesfluctuations to politicians who manipulate economic

policies in order to reelected ( W. Nordhaus. ETufte)

4. Equilibrium business cycles theories claim thatmisperception about prices and wage movements

lead people to supply too much or too little labor,which leads to fluctuations of output and

employment ( R. Lucas, R. Barro, T. Sargent).

5. Real business cycles proponents hold that

innovations or poductivity shocks in one sectorcan spread to rest of the economy and cause

resessions and boom. (J.Scumpeter, E.Prescott,C.Plosser)


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6.Supply shocsoccur when business fluctiations arecaused by shifts in aggregate supply ( R.J.Gordon)

Foundations of Aggregate Demand

Aggregate Demand ( AD) is the total or aggregate

quantity of output that is willingly bought at a given levelof prices, other things held constant. AD is the desired

spending in all product sectors: consumptions, private

domestic investment, government purchases of good

and services, and net exports.


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1. Consumptions (C) is primarily determined bydisposable income, which is personal income less

taxes.

2. Investment (I) spending includes purchases ofbuildings, software, and equipment and

accumulation of inventories. The major

determinants of investment are the level of output,the cost of capital and expectations about the

future.

3. Government purchases (G) of goods and services.

It determined directly by governmentspendingdecisions.


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4. Net Export (X)equal the value of exports minus thevalues of imports. Imports are determined by

domestic income and output, by the ratio ofdomestic to foreign prices, by the foreign exchange

rate of the rupiah. Exports are the determined by

foreign income and outputs, by relative prices, and

by foreign exchange rates. Net esports will bedetermined by domestic and foreign incomes,

relative prices, and exchange rates.


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The Downward-Sloping Aggregate Demand Curve

The AD curve slopes downward. This implies that real

spending declines as the price level rises, other thingsheld constant. Real spending declines with higher pricelevel because of the effect of higher price on realincomes, real wealth, and real money supply.

Shift in Aggregate Demand

Aggregate Demand shifts when there are changes inmacroeconomic policies such as monetary policychanges or changes in government expenditures or tax

rates or when exogenous events chenge spending ( aswould be the case with changes in foreign output,affecting X, or in business confidence, affecting I).


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The aggregate demand curve relates total spending to

the price level. But numerous other influences affectaggregate demand some policy variables, other

exogenous factors. The table lists changes that would

tend to increase aggregate demand and shift out the AD

curve.


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Variable Impact on Aggregate Demand

Policy Variable

Monetary

Policy (MP)

Fiscal Policy

MP effects levels of investment and

consumption of durable goods.

In an open economy MP affects theexchange rate and net exports.

Government purchases and taxes effect

spending in consumption and spendingin particular sector.


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Exogenous Variables

Variable Impact on Aggregate Demand

Foreign OutputAsset Values

Advance in

technology

Other

Output growth abroad leads increse in netexports (X).

Rise in household wealth increse

consumption.

Technological advances can open up newopportunities for business investment.

Political events, free trade agreements

promote business and consumer confidence

and increase spending on investment andconsumers durables.

Kuliah IV Business Fluctuation

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