macroeconomic policy and agriculture chapter 15. page 357 can macroeconomic policy affect...
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![Page 1: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/1.jpg)
MacroeconomicPolicy and Agriculture
Chapter 15
![Page 2: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/2.jpg)
Page 357
Can macroeconomic policy affect agriculture? Sure! The aboveheadline from the front page of the Des Moines Register in 1984described the financial stress caused by double digit interest ratesused by the Fed to bring inflation under control.
Can macroeconomic policy affect agriculture? Sure! The aboveheadline from the front page of the Des Moines Register in 1984described the financial stress caused by double digit interest ratesused by the Fed to bring inflation under control.
![Page 3: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/3.jpg)
Macro
AD ASCPI
GDP
Macro to Micro Linkages for AgricultureMacro to Micro Linkages for Agriculture
Equilibrium in the national
product market
Equilibrium in the national
product market
![Page 4: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/4.jpg)
Macro Market
AD ASCPI
GDP
PCORN
QCORN
DS
Macro to Micro Linkages for AgricultureMacro to Micro Linkages for Agriculture
Equilibrium in the national
product market
Equilibrium in the national
product market
Equilibrium in the national corn
market
Equilibrium in the national corn
market
![Page 5: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/5.jpg)
Macro Market Micro
AD ASCPI
GDP
PCORN
QCORN
$
Output
DS
MC
Macro to Micro Linkages for AgricultureMacro to Micro Linkages for Agriculture
Equilibrium in the national
product market
Equilibrium in the national
product market
Equilibrium in the national corn
market
Equilibrium in the national corn
market
Equilibrium for Gary Corngrower
in Texas
Equilibrium for Gary Corngrower
in Texas
qcorn
![Page 6: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/6.jpg)
Macro trends contributing to the farm financial crisis in the early-1980s
Macro trends contributing to the farm financial crisis in the early-1980s
Page 372
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Drop in real net farmincome and higherreal interest rates ledto declines in farmland values
Drop in real net farmincome and higherreal interest rates ledto declines in farmland values
Page 373
![Page 8: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/8.jpg)
As real net farm incomesdeclined and real interestrates rose, investmentexpenditures fell sharply.Outlays for operating inputsalso declined.
As real net farm incomesdeclined and real interestrates rose, investmentexpenditures fell sharply.Outlays for operating inputsalso declined.
General economy was in much better shape …
General economy was in much better shape …
Page 374
![Page 9: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/9.jpg)
Recall the policy impacts on the general
economy
![Page 10: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/10.jpg)
Page 358
This table summarizes the impacts that expansionaryand contractionary monetary and fiscal policy haveupon key variables that can have a distinct effect on thefinancial health of farm operator families.
This table summarizes the impacts that expansionaryand contractionary monetary and fiscal policy haveupon key variables that can have a distinct effect on thefinancial health of farm operator families.
![Page 11: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/11.jpg)
AI
Effects of Expansionary Monetary PolicyEffects of Expansionary Monetary Policy
Interest rates fallInterest rates fall
![Page 12: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/12.jpg)
AI
Effects of Expansionary Monetary PolicyEffects of Expansionary Monetary Policy
Interest rates fallInterest rates fall
Investment growsInvestment grows
![Page 13: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/13.jpg)
AI
Effects of Expansionary Monetary PolicyEffects of Expansionary Monetary Policy
Interest rates fallInterest rates fall
Investment growsInvestment grows
Gap closes with some inflation
Gap closes with some inflation
![Page 14: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/14.jpg)
Macro Market Micro
AD ASCPI
GDP
PCORN
QCORN
$
Output
DS
Impact of Expansionary Macro PolicyImpact of Expansionary Macro Policy
Equilibrium in the national
product market
Equilibrium in the national
product market
Equilibrium in the national corn
market
Equilibrium in the national corn
market
Equilibrium for Gary Corngrower
in Texas
Equilibrium for Gary Corngrower
in Texas
qcorn
MC
![Page 15: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/15.jpg)
Expansionary monetaryExpansionary monetary policy impacts:•Ag commodity prices in general = Higher•Interest expenses = Lower •Net farm incomes = Higher•Farmland prices = Higher
Expansionary monetaryExpansionary monetary policy impacts:•Ag commodity prices in general = Higher•Interest expenses = Lower •Net farm incomes = Higher•Farmland prices = Higher
![Page 16: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/16.jpg)
Page 358
This table summarizes the impacts that expansionaryand contractionary monetary and fiscal policy haveupon key variables that can have a distinct effect on thefinancial health of farm operator families.
This table summarizes the impacts that expansionaryand contractionary monetary and fiscal policy haveupon key variables that can have a distinct effect on thefinancial health of farm operator families.
![Page 17: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/17.jpg)
Effects of Contractionary Monetary PolicyEffects of Contractionary Monetary Policy
Interest rates riseInterest rates rise
![Page 18: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/18.jpg)
Effects of Contractionary Monetary PolicyEffects of Contractionary Monetary Policy
Interest rates riseInterest rates rise
Investment fallsInvestment falls
![Page 19: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/19.jpg)
Effects of Contractionary Monetary PolicyEffects of Contractionary Monetary Policy
Interest rates riseInterest rates rise
Investment fallsInvestment falls
Gap closes with less inflation
Gap closes with less inflation
![Page 20: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/20.jpg)
Let’s look at policy impacts on the Ag
sector
![Page 21: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/21.jpg)
Macro Market Micro
AD ASCPI
GDP
PCORN
QCORN
$
Output
DS
Impact of Contractionary Macro PolicyImpact of Contractionary Macro Policy
Equilibrium in the national
product market
Equilibrium in the national
product market
Equilibrium in the national corn
market
Equilibrium in the national corn
market
Equilibrium for Gary Corngrower
in Texas
Equilibrium for Gary Corngrower
in Texas
qcorn
MC
![Page 22: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/22.jpg)
Contractionary monetaryContractionary monetary policy impacts:•Ag commodity prices in general = Lower•Interest expenses = Higher•Net farm incomes = Lower•Farmland prices = Lower
Contractionary monetaryContractionary monetary policy impacts:•Ag commodity prices in general = Lower•Interest expenses = Higher•Net farm incomes = Lower•Farmland prices = Lower
![Page 23: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/23.jpg)
Page 358
This table summarizes the impacts that expansionaryand contractionary monetary and fiscal policy haveupon key variables that can have a distinct effect on thefinancial health of farm operator families.
This table summarizes the impacts that expansionaryand contractionary monetary and fiscal policy haveupon key variables that can have a distinct effect on thefinancial health of farm operator families.
![Page 24: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/24.jpg)
Effects of Expansionary Fiscal PolicyEffects of Expansionary Fiscal Policy
Taxes cutDeficit rises
Taxes cutDeficit rises
![Page 25: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/25.jpg)
Effects of Expansionary Fiscal PolicyEffects of Expansionary Fiscal Policy
Taxes cutDeficit rises
Taxes cutDeficit rises
Consumption risesConsumption rises
![Page 26: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/26.jpg)
Effects of Expansionary Fiscal PolicyEffects of Expansionary Fiscal Policy
Taxes cutDeficit rises
Taxes cutDeficit rises
Consumption risesConsumption rises
Gap closes with more inflation
Gap closes with more inflation
![Page 27: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/27.jpg)
Macro Market Micro
AD ASCPI
GDP
PCORN
QCORN
$
Output
DS
Impact of Expansionary Macro PolicyImpact of Expansionary Macro Policy
Equilibrium in the national
product market
Equilibrium in the national
product market
Equilibrium in the national corn
market
Equilibrium in the national corn
market
Equilibrium for Gary Corngrower
in Texas
Equilibrium for Gary Corngrower
in Texas
qcorn
MC
![Page 28: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/28.jpg)
ExpansionaryExpansionary fiscal policy impacts:•Ag commodity prices in general = Higher•Interest expenses = Higher•Net farm incomes = Higher•Farmland prices = Somewhat higher
ExpansionaryExpansionary fiscal policy impacts:•Ag commodity prices in general = Higher•Interest expenses = Higher•Net farm incomes = Higher•Farmland prices = Somewhat higher
![Page 29: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/29.jpg)
Page 358
This table summarizes the impacts that expansionaryand contractionary monetary and fiscal policy haveupon key variables that can have a distinct effect on thefinancial health of farm operator families.
This table summarizes the impacts that expansionaryand contractionary monetary and fiscal policy haveupon key variables that can have a distinct effect on thefinancial health of farm operator families.
![Page 30: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/30.jpg)
Effects of Contractionary Fiscal PolicyEffects of Contractionary Fiscal Policy
Taxes raisedDeficit falls
Taxes raisedDeficit falls
![Page 31: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/31.jpg)
Effects of Contractionary Fiscal PolicyEffects of Contractionary Fiscal Policy
Taxes raisedDeficit falls
Taxes raisedDeficit falls
Consumption fallsConsumption falls
![Page 32: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/32.jpg)
Effects of Contractionary Fiscal PolicyEffects of Contractionary Fiscal Policy
Taxes raisedDeficit falls
Taxes raisedDeficit falls
Consumption fallsConsumption falls
Gap closes with less inflation
Gap closes with less inflation
![Page 33: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/33.jpg)
Macro Market Micro
AD ASCPI
GDP
PCORN
QCORN
$
Output
DS
MC
Impact of Contractionary Macro PolicyImpact of Contractionary Macro Policy
Equilibrium in the national
product market
Equilibrium in the national
product market
Equilibrium in the national corn
market
Equilibrium in the national corn
market
Equilibrium for Gary Corngrower
in Texas
Equilibrium for Gary Corngrower
in Texas
qcorn
![Page 34: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/34.jpg)
ContractionaryContractionary fiscal policy impacts:•Ag commodity prices in general = Lower•Interest expenses = Lower•Net farm incomes = Lower•Farmland prices = Somewhat lower
ContractionaryContractionary fiscal policy impacts:•Ag commodity prices in general = Lower•Interest expenses = Lower•Net farm incomes = Lower•Farmland prices = Somewhat lower
![Page 35: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/35.jpg)
Impacts on economic well being
![Page 36: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/36.jpg)
Price
Quantity
Consumersurplus
Consumersurplus
Producersurplus
Producersurplus
Measuring Economic Well-Being
1
2
![Page 37: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/37.jpg)
Macro Market Micro
AD ASCPI
GDP
PCORN
QCORN
$
Output
DS
MC
What Can We Say About Gary’s Business?What Can We Say About Gary’s Business?
Equilibrium in the national
product market
Equilibrium in the national
product market
Equilibrium in the national corn
market
Equilibrium in the national corn
market
Equilibrium for Gary Corngrower
in Texas
Equilibrium for Gary Corngrower
in Texas
qcorn
ATC
![Page 38: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/38.jpg)
Macro Market Micro
AD ASCPI
GDP
PCORN
QCORN
$
Output
DS
MC
Equilibrium in the national
product market
Equilibrium in the national
product market
Equilibrium in the national corn
market
Equilibrium in the national corn
market
Equilibrium for Gary Corngrower
in Texas
Equilibrium for Gary Corngrower
in Texas
qcorn
What Can We Say About Gary’s Business?What Can We Say About Gary’s Business?
ATC
![Page 39: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/39.jpg)
Price
Quantity
Measuring Economic Well-Being
1
2
3
5
4
Consumersurplus?Before = 1+2After = 1+5Gain = 5 – 2
Consumersurplus?Before = 1+2After = 1+5Gain = 5 – 2
Producersurplus?Before = 3After = 2+3+4Gain = 2+4
Producersurplus?Before = 3After = 2+3+4Gain = 2+4
![Page 40: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/40.jpg)
Macro Market Micro
AD ASCPI
GDP
PCORN
QCORN
$
Output
DS
MC
What Can We Say About Gary’s Business?What Can We Say About Gary’s Business?
Equilibrium in the national
product market
Equilibrium in the national
product market
Equilibrium in the national corn
market
Equilibrium in the national corn
market
Equilibrium for Gary Corngrower
in Texas
Equilibrium for Gary Corngrower
in Texas
qcorn
ATC
![Page 41: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/41.jpg)
Macro Market Micro
AD ASCPI
GDP
PCORN
QCORN
$
Output
DS
Impact of Contractionary Macro PolicyImpact of Contractionary Macro Policy
Equilibrium in the national
product market
Equilibrium in the national
product market
Equilibrium in the national corn
market
Equilibrium in the national corn
market
Equilibrium for Gary Corngrower
in Texas
Equilibrium for Gary Corngrower
in Texas
qcorn
MC
![Page 42: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/42.jpg)
Price
Quantity
Measuring Economic Well-Being
1
2
3
5
4
Consumersurplus?Before = 1+5After = 1+2Loss = 2 – 5
Consumersurplus?Before = 1+5After = 1+2Loss = 2 – 5
Producersurplus?Before = 2+3+4After = 3Loss = 2+4
Producersurplus?Before = 2+3+4After = 3Loss = 2+4
![Page 43: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/43.jpg)
SummaryKnow the direction of affects that
expansionary and contractionary monetary and fiscal policy have on key macro variables, including interest rates, inflation and unemployment.
Know the affects that expansionary and contractionary monetary and fiscal policy have on key Ag sector variables, including farm product prices, farmland values and farm input sales.
Understand the implications for consumer and producer surplus.
![Page 44: Macroeconomic Policy and Agriculture Chapter 15. Page 357 Can macroeconomic policy affect agriculture? Sure! The above headline from the front page of](https://reader030.vdocument.in/reader030/viewer/2022032704/56649d4e5503460f94a2e09f/html5/thumbnails/44.jpg)
Chapter 16 begins our focus on international trade….