1. Chapter 6
Business Cycles and Short-Run Macroeconomics—Essentials of the Keynesian System
PowerPoint Presentation by Charlie Cook Copyright © 2004 South-Western. All rights reserved.

2. Fundamental Issues
What are business cycles, and what are their key features?
What are the key relationships implied by the circular flow of income and expenditures?
What are the components of aggregate desired expenditures in the basic Keynesian model?
How is equilibrium real income determined in the basic Keynesian model, and how does this theory explain short-run business cycles?
How is the equilibrium trade balance determined?
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3. A Hypothetical Business Cycle
Figure 6–1
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4. Business Cycle Expansions and Recessions in the United States
*Cycles are measured from peak to peak.
Table 6–1
Sources: National Bureau of Economic Research; Survey of Current Business; authors’ estimates.
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5. Unemployment Rates and Phases of the Business Cycle
Unemployment rate (percent of civilian labor force)
Source: Economic Report of the President, 2002; National Bureau of Economic Research; Economic Indicators (various issues).
Figure 6–2
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6. Circular Flow of Income and Expenditures
Figure 6–3
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7. The Saving Function
Figure 6–4
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8. The Import Function
Figure 6–4b
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9. The Import Function
Figure 6–4c
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10. Factors Causing Changes in Desired Investment
Figure 6–5
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11. U.S. Final Sales of Computers and the Real Price of Computers
Sources: Michael Pakko, “Accounting for Computers,” Federal Reserve Bank of St. Louis National Economic Trends, May 2001; authors’ estimates.
Figure 6–6
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12. The Government Spending and Net Tax Schedules
Figure 6–7
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13. The Export Schedule
Figure 6–8
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14. Deriving the Aggregate Expenditures Schedule
Figure 6–9
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15. The 45-Degree Line
Figure 6–10
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16. Two Approaches to Determining Equilibrium Real Income
Figure 6–11
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17. The Determination of Equilibrium Real Income
Figure 6–12
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18. The Multiplier Effect on Real Income Caused by a Decline in Real Investment
Figure 6–13
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19. Real Consumption, Government Spending, Exports, and Investment since 1993
Sources: Bureau of Economic Analysis;
Economic Indicators, various issues.
Figure 6–14a
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20. Investment since 1993
Sources: Bureau of Economic Analysis;
Economic Indicators, various issues.
Figure 6–14b
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21. Determining the Equilibrium Trade Balance
Figure 6–15
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22. Components of the Index of Leading Economic Indicators
Source: Conference Board.
Table 6–2
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23. The Leading Economic Indicators Index since 1970
Sources: Marco Del Negro, “Turn, Turn, Turn: Predicting Turning Points in Economic Activity,” Federal Reserve Bank of Atlanta Economic Review, Second Quarter 2001, pp. 1–12; Conference Board; National Bureau of Economic Research.
Figure 6–16
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