Demand-Pull Inflation under Johnson발음듣기
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Demand-Pull Inflation under Johnson
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출처 : 칸아카데미
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Male voice: What I want to do in this video is a little bit of 1960's U.S. economic history and then just see if our Aggregate Demand Aggregate Supply model fits the description of what actually happened.발음듣기
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One could argue you don't need the ADAS model to describe what happened, but we should at least make sure that it does describe what happened.발음듣기
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The only reason why I give his party affiliation is because if the economy is weak, and in 1960 the economy was weak and one can always debate whether it was due to the government or whether it was due to just the natural fluctuations in the economy, but in general, when the economy is weak, it tends to go against the party that is in power.발음듣기
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One could argue that was a major reason why the Democratic candidate in the 1960 election was able to win, John F. Kennedy. In 1961, JFK is inaugurated.발음듣기
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He does it with what can best be described as Keynesian policies, and we'll talk more about that in future videos.발음듣기
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It's the general idea that the government might be able to turn around a recession by sparking demand.발음듣기
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The way that it would spark demand is try to put more money in people's pockets, or even in businesses' pockets.발음듣기
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It would do that through some combination of increased government spending, maybe somehow giving money to the poor, some types of transfer programs, and tax cuts for people and for businesses so that they have more money to spend.발음듣기
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These policies get implemented and over John F. Kennedy's term you do have GDP begins to turn back around, unemployment, I'll just write employment goes up, and inflation stays low.발음듣기
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Unfortunately, this is just kind of a sad human event, in 1963, John F. Kennedy, you probably know, is assassinated.발음듣기
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Then his Vice President, Lyndon Baines Johnson, that is LBJ right over there, Lyndon Baines Johnson becomes President.발음듣기
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A little bit of trivia: He's tied for the tallest President in U.S. history, tied with Abraham Lincoln at 6'4".발음듣기
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If Keynesian policies were really to be practiced here to their full idea, in theory, once the economy started to get a little bit really overheated and really approaching its potential, in maybe 1964-1965, the government maybe should have started to pull back a little bit on its spending so that the economy doesn't get overheated.발음듣기
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A major factor was right over here, the Vietnam War, which was escalated in a major way under LBJ's administration.발음듣기
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JFK was already dabbling in Vietnam, but it became a really major war for the United States under Lyndon Baines Johnson.발음듣기
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So some combination of Vietnam, and he had a huge number of social programs, increased government spending, to try to ease inequality in the U.S. as well, so social programs.발음듣기
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The net effect of this is government spending even though the economy was already red hot, it was already at its potential, he wanted to increase government spending even more, so he kind of took it beyond its potential.발음듣기
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He made it overheat a little bit and what happens in 1966 and onwards is that you have inflation starting to grow at a fairly uncomfortable rate.발음듣기
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Just to get a sense of it, when I keep saying that the economy was at its potential and maybe he might have taken a little bit of his pedal off the gas, or his foot off of the pedal, I should say, is as we get into the beginning of his administration, 1964-1965, unemployment is in the 4-5% range.발음듣기
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Despite that, and maybe he could argue maybe his hand was forced by geopolitical events especially on military funding, the government continues to even spend more money, stimulates things even more because that money goes to soldiers' salaries, it goes to companies that provide, I guess that make napalm or make boats or make whatever else.발음듣기
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All of these government programs inject even more dollars into the economy, and so you ended up with inflation. The economy was already operating at close to capacity and it made it go maybe even beyond its natural capacity.발음듣기
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Let's see whether our ADAS model would make, would allow for this to happen, or would describe this, or would predict this given what was going on.발음듣기
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If we go into the 1964-1965 timeframe, you could say that the U.S. is performing at its potential GDP. When I talk about its potential GDP, I'm saying that on the long run, assuming that people aren't overworked, assuming that factories are getting their proper maintenance,발음듣기
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they're not being run so hard that they start cracking at the seams, this is how much that the U.S. can produce.발음듣기
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If theory, if everyone worked even harder and didn't sleep and were doing things in an unsustainable way, they might even be able to produce more.발음듣기
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When we talk about potential we're not talking about that short term theoretical maximum, we're talking about the maximum GDP that an economy can produce, I guess you could say, in a healthy way, or over the long run, assuming that people aren't overworked and that the factories aren't overworked in some way, shape or form.발음듣기
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This right over here is aggregate ... let me draw it a little bit better than that with the slope ...발음듣기
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Right over there, and as we see, the equilibrium level of prices on this model now has gone up.발음듣기
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that people and factories are really operating at, maybe beyond full capacity, or beyond a sustainable full capacity.발음듣기
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Then on the long run, you really wouldn't be able to sustain this level of producing above your potential,발음듣기
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