Description                                  
Mort is working and listening to the radio simultaneously. According to the announcer, a heated economic debate is ensuing between the President and the leader of the opposing party, Wilbur White, illustrating that there are various, conflicting schools of macroeconomic analysis. 

Mort: 
(Turns on the radio) 

Radio Announcer: 
Things are heating up on the campaign trail over economic issues. At a fund-raiser today, the President defended his record. 

President: 
Through our economic revitalization programs, we've created millions of new jobs without raising taxes. Gross domestic product is up 3% over last year. Our economy is stronger than ever. 

Radio Announcer: 
Meanwhile, Wilbur White, his main challenger in the Conservative Party attacked the President's record. 

Wilbur White: 
All the President ever talks about is jobs, jobs, jobs. Well... what about inflation? The consumer price index has risen 5% in the past year. Your dollars are worth less than they were a year ago. If you adjust the GDP for inflation, the economy isn't growing at all. I say reduce taxes and cut expensive government programs. Let the free market decide where the jobs come from. 

Radio Announcer: 
And in sports... the Beantown Beavers beat the Pleasantville Panthers in a close match.... 

(Clouds roll in and the sky turns dark)

Mort: 
Looks like a storm's blowing in. Better get the birds in the barn. 

Narrator: 
Mort may be concerned about rising prices, but like most people he usually has more important things to do than listen to political debates over the government's role in the economy. And with all the statistics and terminology that gets tossed around, who can blame him. It's easy to get confused about the actual state of the economy. 

Narrator: 
Terms like real GDP, full employment and the consumer price index are important in describing the state of the economy. But even with consistent terminology, economists differ in their assessment of factors that effect the overall price level. 

Narrator: 
Put simply, classical economists subscribe to the belief that increased government spending contributes to inflation with no real increase in output. Keynesian economists believe that government spending increases aggregate demand, which increases output and employment levels. 

Narrator: 
By taking a closer look at the aggregate demand and aggregate supply curves, we'll uncover the basis for these arguments. 

--End--           Back