Test Yourself: Monetary Policy
|
|
- Oliver Blake
- 5 years ago
- Views:
Transcription
1 Test Yourself: Monetary Policy The improvement of understanding is for two ends: first, our own increase of knowledge; second, to enable us to deliver that knowledge to others. John Locke
2 What is the transaction demand for money?
3 The transaction demand for money is the stock of money people hold to pay everyday predictable expenses.
4 What is the precautionary demand for money?
5 The precautionary demand for money is the stock of money people hold to pay unpredictable expenses.
6 What is the speculative demand for money?
7 The speculative demand for money is the stock of money people hold to take advantage of expected future changes in the price of bonds, stocks or other non-monies.
8 How does a change in interest rates affect speculative demand?
9 As the interest rate falls, the opportunity cost of holding money falls and people increase their speculative balances.
10 What is the demand for money curve?
11 The demand for money curve is a curve representing the quantity of money that people hold at different interest rates, ceteris paribus.
12 How do interest rates affect the demand for money?
13 There is an inverse relationship between the quantity of money demanded and the interest rate. (inverse = as one goes up the other goes down)
14 What gives the demand for money a downward slope?
15 The speculative demand for money at possible interest rates gives the demand for money a downward slope.
16 What determines interest rates in the market?
17 The demand and supply of money in the loanable funds market determines interest rates (the price of money), just as the demand and supply of a good determines its price.
18 Interest Rate The Demand for Money Curve 16% 12% 8% A 4% B Billions of dollars MD 500 1,000 1,500 2,000
19 The Demand for Money Increase in the quantity of money demanded Decrease in the interest rate
20 Interest Rate The Equilibrium Interest Rate 16% 12% MS Surplus 8% E Shortage 4% MD Billions of dollars 500 1,000 1,500 2,000
21 Excess Money Demand Bond prices fall and the interest rate rises People sell bonds Excess money demand
22 Excess Money Supply Bond prices rise and the interest rate falls People buy bonds Excess money supply
23 Why do bond prices fall as interest rates rise?
24 Bond prices fall as interest rates rise because bond sellers have to offer higher returns (lower price) to attract potential bond buyers or else buyers will go elsewhere to get higher interest returns.
25 Why do bond prices rise as interest rates fall?
26 Bond prices rise as interest rates fall because bond sellers are put in a better bargaining position as interest rates fall (higher price). Potential buyers can t easily go elsewhere to get higher interest returns.
27 How can the Fed influence the equilibrium interest rate?
28 The Fed can influence the equilibrium interest rate by increasing or decreasing the supply of money.
29 Interest Rate Increase in the Money Supply 16% MS 1 MS 2 Surplus 12% E 1 8% E 2 MD 4% Billions of dollars 500 1,000 1,500 2,000
30 Increase in the Money Supply Decrease the interest rate Money surplus and people buy bonds Increase in the money supply
31 Interest Rate Decrease in the Money Supply 16% MS 2 MS 1 12% E 2 Shortage 8% E 1 MD 4% Billions of dollars 500 1,000 1,500 2,000
32 Decrease in the Money Supply Increase in the interest rate Money shortage and people sell bonds Decrease in the money supply
33 In the Keynesian Model, what do changes in the money supply affect?
34 In the Keynesian Model, changes in the money supply affect Interest rates, which in turn affect investment spending, aggregate demand, real GDP, employment and prices.
35 Keynesian Policy Change in the money supply Change in prices, real GDP, employment Keynesian Policy Change in interest rates Change in the aggregate demand curve Change in investment
36 Interest Rate Expansionary Monetary Policy 16% MS 1 MS 2 Surplus 12% E 1 8% E 2 MD 4% Billions of dollars 500 1,000 1,500 2,000
37 Interest Rate Investment Demand Curve 16% 12% A 8% B I 4% Billions of dollars 1,000 1,500
38 When will businesses make an investment?
39 Businesses make investments when there are investment projects for which the expected rate of profit equals or exceeds the interest rate.
40 Price Level Product Market AS 155 E 2 AD E 1 full employment AD 1 Billions of dollars
41 What is the Classical economic view?
42 The Classical economic view is that the economy is stable in the longrun at full employment. Classical economists view of the role of money is based on their belief in the equation of exchange.
43 What is the equation of exchange?
44 The equation of exchange is an accounting identity that states that the money supply times the velocity of money equals total spending.
45 What is the velocity of money?
46 The velocity of money is the average number of times per year a dollar in the money supply is spent on final goods and services. MV = PQ (money)(velocity) = (price)(quantity)
47 What is Monetarism?
48 Monetarism is the theory that changes in the money supply directly determine changes in prices, real GDP and employment.
49 Monetarist Policy Change in the quantity of money Change in prices, real GDP, employment Monetarist Policy Change in the money supply Change in the aggregate demand curve
50 What is the quantity theory of money?
51 The quantity theory of money is the theory that changes in the money supply are directly related to changes in the price level. Therefore, any change in the money supply must lead to a proportional change in the price level.
52 Who was Milton Friedman?
53 In the 1950s and 1960s, Milton Friedman was a leader in putting forth the ideas of the modern-day monetarists. Monetarists argue that velocity is not unchanging, but is nevertheless predictable. Friedman said that the Federal Reserve should increase the money supply by a constant percentage each year to enhance full employment and stable prices.
54 According to the Monetarists, how do we avoid inflation and unemployment?
55 According to the Monetarists, we avoid inflation and unemployment by making sure that the money supply is at the proper level.
56 How do the Keynesians view the velocity of money?
57 Keynesians believe that, over long periods of time, the velocity of money can be unstable and unpredictable. Because velocity is unpredictable, a change in the money supply can lead to a much larger or smaller change in GDP than the monetarists would predict. Again because velocity is unpredictable, a constant money supply may not support full employment and stable prices. That means the Federal Reserve must be free to change the money supply to offset unexpected changes in the velocity of money.
58 The Velocity of Money
59 What is the crowding-out effect?
60 The crowding-out effect happens when too much government borrowing crowds out consumers and investors from the loanable funds market.
61 What are the main points of Classical economics?
62 The main points of Classical economics: The economy tends toward full employment equilibrium. Prices and wages are flexible. The velocity of money is stable. Excess money causes inflation. Short-run price and wage adjustments cause unemployment. Monetary policy can change aggregate demand and prices. Fiscal policies are not necessary.
63 What are the main points of Keynesian economics?
64 The main points of Keynesian economics: The economy is unstable at less than full employment. Prices and wages are inflexible. The velocity of money is stable. Excess demand causes inflation. Inadequate demand causes unemployment. Monetary policy can change interest rates and the level of GDP. Fiscal policies may be necessary. The investment demand curve is rather steep (vertical), so the crowding-out effect is insignificant.
65 What are the main points of Monetarist economics?
66 The main points of Monetarist economics: The economy tends toward full employment equilibrium. Prices and wages are flexible. The velocity of money is predictable. Excess money causes inflation. Short-run price and wage adjustments cause unemployment. Monetary policy can change aggregate demand and prices. Fiscal policies are not necessary. The investment demand curve is flatter (horizontal), so the crowding-out effect is significant.
67 The End
Money and the Economy CHAPTER
Money and the Economy 14 CHAPTER Money and the Price Level Classical economists believed that changes in the money supply affect the price level in the economy. Their position was based on the equation
More informationDisputes In Macroeconomics
No G G & T 3-5% Monetary Rule Expectations negate fiscal and monetary Policy. Adam Smith John M. Keynes Milton Friedman Classicals Keynesians Monetarists Robert Lucas Get the G off of our backs. Ronald
More informationVelocity of Money and the Equation of Exchange
Velocity of Money and the Equation of Exchange Velocity of Money the rate at which the dollar travels around the economy from consumer to consumer. measures the economic activity of a nation V = P x Y
More informationEcon 110: Introduction to Economic Theory. 35th Class 4/25/11. Keynes vs. Hayek rap:
Econ 0: Introduction to Economic Theory th Class // Keynes vs. Hayek rap: http://www.youtube.com/watch?v=d0nertfo-sk last of three lectures on macroeconomic stabilization policy: macro policy debates It
More informationArchimedean Upper Conservatory Economics, November 2016 Quiz, Unit VI, Stabilization Policies
Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The federal budget tends to move toward _ as the economy. A. deficit; contracts B. deficit; expands C.
More informationDEMAND FOR MONEY. Ch. 9 (Ch.19 in the text) ECON248: Money and Banking Ch.9 Dr. Mohammed Alwosabi
Ch. 9 (Ch.19 in the text) DEMAND FOR MONEY Individuals allocate their wealth between different kinds of assets such as a building, income earning securities, a checking account, and cash. Money is what
More informationDisputes Over Macro Theory and Policy
s or Discretion C H A P T E R Disputes Over Macro Theory and Policy 19-1 s or Discretion 19-2 CLASSICAL ECONOMICS AND KEYNES Classical Economics Adam Smith - 1776 Laissez-faire The Classical Vertical Aggregate
More informationCHAPTER 10 MONEY P = MV/Q. We now see the direct relationship between money and prices (increase money, and the price level increases).
CHAPTER 10 MONEY Chapter in a Nutshell Although we know from experience that, under certain circumstances, barter exchange works, the complications associated with the requirements of a double coincidence
More informationTHE FEDERAL RESERVE AND MONETARY POLICY Macroeconomics in Context (Goodwin, et al.)
Chapter 12 THE FEDERAL RESERVE AND MONETARY POLICY Macroeconomics in Context (Goodwin, et al.) Chapter Overview In this chapter, you will be introduced to a standard treatment of central banking and monetary
More informationInflation and the Phillips Curve
CHAPTER 33 Inflation and the Phillips Curve The first few months or years of inflation, like the first few drinks, seem just fine. Everyone has more money to spend and prices aren t rising quite as fast
More informationThe Influence of Monetary and Fiscal Policy on Aggregate Demand. Lecture
The Influence of Monetary and Fiscal Policy on Aggregate Demand Lecture 10 28.4.2015 Previous Lecture Short Run Economic Fluctuations Short Run vs. Long Run The classical dichotomy and monetary neutrality
More informationInflation, Unemployment and the Federal Reserve Policy Chapter 16
Inflation, Unemployment and the Federal Reserve Policy Chapter 16 The Discover of the Short-Run Trade-off between Unemployment and Inflation Phillips curve: A curve showing the short-run relationship between
More informationEconomics 102 Discussion Handout Week 14 Spring Aggregate Supply and Demand: Summary
Economics 102 Discussion Handout Week 14 Spring 2018 Aggregate Supply and Demand: Summary The Aggregate Demand Curve The aggregate demand curve (AD) shows the relationship between the aggregate price level
More informationPrinciple of Macroeconomics, Summer B Practice Exam
Principle of Macroeconomics, Summer B 2017 Practice Exam 1) If real GDP in a small country in 2015 is $8 billion and real GDP in the same country in 2016 is $8.3 billion, the growth rate of real GDP between
More informationEconomics 102 Discussion Handout Week 14 Spring Aggregate Supply and Demand: Summary
Economics 102 Discussion Handout Week 14 Spring 2018 Aggregate Supply and Demand: Summary The Aggregate Demand Curve The aggregate demand curve (AD) shows the relationship between the aggregate price level
More information5. What is the Savings-Investment Spending Identity? Savings = Investment Spending for the economy as a whole
Unit 4 Test Review KEY Savings, Investment and the Financial System 1. What is a financial intermediary? Explain how each of the following fulfills that role: Financial Intermediary: Transforms funds into
More informationThe Influence of Monetary and Fiscal Policy on Aggregate Demand
The Influence of Monetary and Fiscal Policy on Aggregate Demand 34 Aggregate Demand Many factors influence aggregate demand besides monetary and fiscal policy. In particular, desired spending by households
More informationDokuz Eylül University Faculty of Business Department of Economics
Dokuz Eylül University Faculty of Business Department of Economics ECN 1002 PROBLEM SET III Q1) A link between the money market and the goods and services market exists through the impact of A) tax revenue
More informationChapter 19. Quantity Theory, Inflation and the Demand for Money
Chapter 19 Quantity Theory, Inflation and the Demand for Money Quantity Theory of Money Velocity of Money and The Equation of Exchange M = the money supply P = price level Y = aggregate output (income)
More informationCHAPTER 19 Disputes over Macro Theory and Policy
CHAPTER 19 Disputes over Macro Theory and Policy Topic Question numbers 1. Classics vs. Keynes: AD/AS 1-9 2. Mainstream view of instability 10-14 3. Monetarism/equation of exchange 15-53 4. Real-business
More informationEcon 330 Final Exam Name ID Section Number
Econ 330 Final Exam Name ID Section Number MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A group of economists believe that the natural rate
More informationLeandro Conte UniSi, Department of Economics and Statistics. Money, Macroeconomic Theory and Historical evidence. SSF_ aa
Leandro Conte UniSi, Department of Economics and Statistics Money, Macroeconomic Theory and Historical evidence SSF_ aa.2017-18 Learning Objectives ASSESS AND INTERPRET THE EMPIRICAL EVIDENCE ON THE VALIDITY
More informationChapter 9 Introduction to Economic Fluctuations
Chapter 9 Introduction to Economic Fluctuations facts about the business cycle how the short run differs from the long run an introduction to aggregate demand an introduction to aggregate supply in the
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
ECON 3312 Mcroeconomics Exam 2 Fall 2016 Prof. Crowder Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) If output is currently 1000 below full
More informationSticky Wages and Prices: Aggregate Expenditure and the Multiplier. 5Topic
Sticky Wages and Prices: Aggregate Expenditure and the Multiplier 5Topic Questioning the Classical Position and the Self-Regulating Economy John Maynard Keynes, an English economist, changed how many economists
More informationECON 3560/5040 Week 8-9
ECON 3560/5040 Week 8-9 AGGREGATE DEMAND 1. Keynes s Theory - John Maynard Keynes (1936) criticized classical theory for assuming that AS alone capital, labor, and technology determines national income
More informationChapter 9 Chapter 10
Assignment 4 Last Name First Name Chapter 9 Chapter 10 1 a b c d 1 a b c d 2 a b c d 2 a b c d 3 a b c d 3 a b c d 4 a b c d 4 a b c d 5 a b c d 5 a b c d 6 a b c d 6 a b c d 7 a b c d 7 a b c d 8 a b
More informationDetermining the Quantity Demanded of an Asset
Determining the Quantity Demanded of an Asset Wealth the total resources owned by the individual, including all assets Expected Return the return expected over the next period on one asset relative to
More informationIntroduction to Economic Fluctuations
Chapter 9 Introduction to Economic Fluctuations slide 0 In this chapter, you will learn facts about the business cycle how the short run differs from the long run an introduction to aggregate demand an
More information1) List the 3 functions of money: 4) The Federal Reserve is the bank of the USA. It is considered from the Government and has 2 primary goals:
AP ECONOMICS---Ippolito 2017 Study Guide for Monetary Policy (unit #4) Name: Due Friday December 8 th Multiple Choice Test (25 questions, 100 pts) 1) List the 3 functions of money: 2) What is liquidity?
More informationChapter 10 Aggregate Demand I CHAPTER 10 0
Chapter 10 Aggregate Demand I CHAPTER 10 0 1 CHAPTER 10 1 2 Learning Objectives Chapter 9 introduced the model of aggregate demand and aggregate supply. Long run (Classical Theory) prices flexible output
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Suppose government has a budget deficit of $500 billion. If there is no Ricardo-Barro
More informationThe Monetarists Counterrevolution
ECON 313: MACROECONOMICS I W/C 2 th November 2015 MACROECONOMIC THEORY AFTER KEYNES The Monetarists Counterrevolution Ebo Turkson, PhD The Monetarists Counterrevolution FROYEN CHAPTER 9: 1 Sections The
More informationCome and join us at WebLyceum
Come and join us at WebLyceum For Past Papers, Quiz, Assignments, GDBs, Video Lectures etc Go to http://www.weblyceum.com and click Register In Case of any Problem Contact Administrators Rana Muhammad
More informationTHE INFLUENCE OF MONETARY AND FISCAL POLICY ON AGGREGATE DEMAND. Chapter 34
1 THE INFLUENCE OF MONETARY AND FISCAL POLICY ON AGGREGATE DEMAND Chapter 34 Importance of economic policy Economic policy refers to the actions of the government that have a direct impact on the macroeconomic
More informationMidsummer Examinations 2013
Midsummer Examinations 2013 No. of Pages: 7 No. of Questions: 34 Subject ECONOMICS Title of Paper MACROECONOMICS Time Allowed Two Hours (2 Hours) Instructions to candidates This paper is in two sections.
More informationLecture 22. Aggregate demand and aggregate supply
Lecture 22 Aggregate demand and aggregate supply By the end of this lecture, you should understand: three key facts about short-run economic fluctuations how the economy in the short run differs from the
More informationChapter Twenty. In This Chapter 4/29/2018. Chapter 22 Quantity Theory, Inflation and the Demand for Money
Chapter Twenty Chapter 22 Quantity Theory, Inflation and the Demand for Money In This Chapter 1. The quantity theory of money. 2. The velocity of, and demand for, money. 3. Money targeting. Money Growth
More informationReview Questions. The Labor Market: Definitions, Facts, and Trends. Choose the letter that represents the BEST response.
Review Questions Choose the letter that represents the BEST response. The Labor Market: Definitions, Facts, and Trends 1. The labor force consists of a. all individuals aged 16 or older who are employed
More informationINFLATION, JOBS, AND THE BUSINESS CYCLE*
Chapt er 12 INFLATION, JOBS, AND THE BUSINESS CYCLE* Key Concepts Inflation Cycles1 In the long run inflation occurs because the quantity of money grows faster than potential GDP. Inflation can start as
More informationTHE INFLUENCE OF MONETARY AND FISCAL POLICY ON AGGREGATE DEMAND
20 THE INFLUENCE OF MONETARY AND FISCAL POLICY ON AGGREGATE DEMAND LEARNING OBJECTIVES: By the end of this chapter, students should understand: the theory of liquidity preference as a short-run theory
More informationBUSI 101 Capital Markets and Real Estate
BUSI 101 Capital Markets and Real Estate PURPOSE AND SCOPE The Capital Markets and Real Estate course (BUSI 101) is intended to acquaint the student with the basic principles of macroeconomics and to give
More informationPractice Problems
Practice Problems 33-34-36 1. The inflation tax is: A. the higher tax paid by individuals whose incomes are indexed to inflation. B. the taxes paid during periods of inflation. C. the reduction in the
More informationAP Econ Practice Test Unit 5
DO NOT WRITE ON THIS TEST! AP Econ Practice Test Unit 5 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The marginal propensity to consume is equal to:
More informationQUICK REVISION. CFA level 1
ECONOMICS QUICK REVISION NOTES CFA level 1 Edited By Sam Economics Keynes: Sticky prices, so if Demand falls, Supply will fall, and employment falls Expenditures GDP: Consumer Spending, Private Investment,
More informationECON 3312 Macroeconomics Exam 2 Spring 2017 Prof. Crowder
ECON 3312 Macroeconomics Exam 2 Spring 2017 Prof. Crowder Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Suppose the economy is currently
More informationECON 313: MACROECONOMICS I W/C 23 RD October 2017 MACROECONOMIC THEORY AFTER KEYNES The Monetarists Counterrevolution Ebo Turkson, PhD
ECON 313: MACROECONOMICS I W/C 23 RD October 2017 MACROECONOMIC THEORY AFTER KEYNES The Monetarists Counterrevolution Ebo Turkson, PhD The Monetarists Propositions The 4 Main Propositions and their Implications
More informationAnswers to Questions: Chapter 8
Answers to Questions in Textbook 1 Answers to Questions: Chapter 8 1. In microeconomics, the demand curve shows the various quantities of a specific product that a consumer wants at various prices for
More informationThe Influence of Monetary and Fiscal Policy on Aggregate Demand
The Influence of Monetary and Fiscal Policy on Aggregate Demand Chapter 20 Copyright 2001 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any part of the work should be
More informationIII. 9. IS LM: the basic framework to understand macro policy continued Text, ch 11
Objectives: To apply IS-LM analysis to understand the causes of short-run fluctuations in real GDP and the short-run impact of monetary and fiscal policies on the economy. To use the IS-LM model to analyse
More informationThe Aggregate Demand/Aggregate Supply Model
CHAPTER 27 The Aggregate Demand/Aggregate Supply Model The Theory of Economics... is a method rather than a doctrine, an apparatus of the mind, a technique of thinking which helps its possessor to draw
More informationECON 1000 Contemporary Economic Issues (Spring 2018) The Stabilization Function of Government
ECON 1000 Contemporary Economic Issues (Spring 2018) The Stabilization Function of Government Relevant Readings from the Required Textbooks: Chapter 7, Gross Domestic Product and Economic Growth Chapter
More informationAggregate to add up, aggregation usually implies that the things being added up are similar, but not exactly identical
Macro Short-Run AS/AD Model Essentials Up to this point, our discussions of unemployment, inflation, output, and income have revolved around how we measure these indicators of economic performance. Now
More informationAGGREGATE DEMAND AGGREGATE SUPPLY
AGGREGATE DEMAND 8 AND CHAPTER AGGREGATE SUPPLY A Way to View the Economy We can think of an economy as consisting of two major activities: buying and producing. When economists speak about aggregate demand,
More informationMankiw Chapter 10. Introduction to Economic Fluctuations. Introduction to Economic Fluctuations CHAPTER 10
Mankiw Chapter 10 0 IN THIS CHAPTER, WE WILL COVER: facts about the business cycle how the short run differs from the long run an introduction to aggregate demand an introduction to aggregate supply in
More informationAGGREGATE DEMAND, AGGREGATE SUPPLY, AND INFLATION. Chapter 25
1 AGGREGATE DEMAND, AGGREGATE SUPPLY, AND INFLATION Chapter 25 2 One of the most important issues in macroeconomics is the determination of the overall price level Up to now, we took the price level as
More informationTHE INFLUENCE OF MONETARY AND FISCAL POLICY ON AGGREGATE DEMAND
34 THE INFLUENCE OF MONETARY AND FISCAL POLICY ON AGGREGATE DEMAND Questions for Review 1. The theory of liquidity preference is Keynes's theory of how the interest rate is determined. According to the
More informationMacro Problem Set 3 Fall 2015
Macro Problem Set 3 Fall 2015 Directions: The True/False and Multiple Choice questions do not have to be turned in for credit. It would be foolish, however, not to spend a great deal of time working on
More informationThe Influence of Monetary and Fiscal Policy on Aggregate Demand
The Influence of Monetary and Fiscal Policy on Aggregate Demand Chapter 34 Copyright 2001 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any part of the work should be
More informationReal GDP Growth in the United States Introduction to Economic Fluctuations slide 2.
Real GD Growth in the United States 10 ercent change from 4 quarters 8 earlier Average growth rate = 3.5% 6 4 2 0-2 -4 1960 1965 1970 1975 1980 1985 1990 1995 2000 Introduction to Economic Fluctuations
More informationHomework 4 of ETP Economics
Homework 4 of ETP Economics Winter Term 2014 Due: May 28 1.When the money market is drawn with the value of money on the vertical axis, if the price level is above the equilibrium level, there is an a.
More informationModel Question Paper Economics - II (MSF1A4)
Model Question Paper Economics - II (MSF1A4) Answer all 74 questions. Marks are indicated against each question. 1. Which of the following is true if the central bank of a country sells government securities
More informationKeynesian Theory (IS-LM Model): how GDP and interest rates are determined in Short Run with Sticky Prices.
Keynesian Theory (IS-LM Model): how GDP and interest rates are determined in Short Run with Sticky Prices. Historical background: The Keynesian Theory was proposed to show what could be done to shorten
More informationThe fixed money supply is represented by a vertical supply curve.
Chapter 20 The Influence of Monetary and Fiscal Policy on Aggregate Demand OUTLINE: 1. The theory of liquidity preference. 2. How monetary policy affects aggregate demand. 3. How fiscal policy affects
More informationIf a model were to predict that prices and money are inversely related, that prediction would be evidence against that model.
The Classical Model This lecture will begin by discussing macroeconomic models in general. This material is not covered in Froyen. We will then develop and discuss the Classical Model. Students should
More informationThe Influence of Monetary and Fiscal Policy on Aggregate Demand P R I N C I P L E S O F. N. Gregory Mankiw. Introduction
C H A P T E R 34 The Influence of Monetary and Fiscal Policy on Aggregate Demand P R I N C I P L E S O F Economics N. Gregory Mankiw Introduction This chapter focuses on the short-run effects of fiscal
More informationChapter 9. Introduction to Economic Fluctuations
Chapter 9 Introduction to Economic Fluctuations 0 1 Learning Objectives difference between short run & long run introduction to aggregate demand aggregate supply in the short run & long run see how model
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Exam - Version A Name 1) Full-employment output is: A) the level of output that is produced when there is no voluntary unemployment. B) the level of output that is produced when the unemployment rate is
More informationECO401 Quiz # 5 February 15, 2010 Total questions: 15
ECO401 Quiz # 5 February 15, 2010 Total questions: 15 Question # 1 of 15 ( Start time: 09:37:50 PM ) Total Marks: 1 Economic activity moves from a trough into a period of until it reaches a and then into
More informationChapter 11 The Determination of Aggregate Output, the Price Level, and the Interest Rate
Principles of Macroeconomics Twelfth Edition Chapter 11 The Determination of Aggregate Output, the Price Level, and the Interest Rate Copyright 2017 Pearson Education, Inc. 11-1 Copyright 11-2 Chapter
More informationTest Review. Question 1. Answer 1. Question 2. Answer 2. Question 3. Econ 719 Test Review Test 1 Chapters 1,2,8,3,4,7,9. Nominal GDP.
Question 1 Test Review Econ 719 Test Review Test 1 Chapters 1,2,8,3,4,7,9 All of the following variables have trended upwards over the last 40 years: Real GDP The price level The rate of inflation The
More informationChapter8 3/9/2018. MONEY, THE PRICE LEVEL, AND INFLATION Part 2. The Money Market the Demand for Money
Chapter8 MONEY, THE PRICE LEVEL, AND INFLATION Part 2 the Demand for Money How much money do people and business firms want to hold? Depends on four main factors: The price level (P) Real GDP (Y), The
More informationChapter Twenty 11/26/2017. Chapter 20 Money Growth, Money Demand, and Modern Monetary Policy. In This Chapter. 1. The quantity theory of money.
Chapter Twenty Chapter 20 Money Growth, Money Demand, and Modern Monetary Policy In This Chapter 1. The quantity theory of money. 2. The velocity of, and demand for, money. 3. Money targeting. Money Growth
More informationAggregate Demand and Aggregate Supply
Aggregate Demand and Aggregate Supply Chapter 19 Copyright 2001 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any part of the work should be mailed to: Permissions Department,
More informationEssex EC248-2-SP Lecture 5. The Demand for Money and Monetary Theory. Alexander Mihailov, 13/02/06
Essex EC248-2-SP Lecture 5 The Demand for Money and Monetary Theory Alexander Mihailov, 13/02/06 Plan of Talk Introduction 1. Theories on the Demand for Money 2. Money in IS-LM and AD-AS Analysis 3. Money
More informationPlan of Talk. Quantity Theory of Money. Aims and Learning Outcomes. P Y Velocity V (definition) M Equation of Exchange M V P Y (identity)
Essex EC248-2-SP Lecture 5 The Demand for Money and Monetary Theory Alexander Mihailov, 13/02/06 Plan of Talk Introduction 1. Theories on the Demand for Money 2. Money in IS-LM and AD-AS Analysis 3. Money
More informationChapter 25. Aggregate Demand and Supply Analysis
Chapter 25 Aggregate Demand and Supply Analysis 2006 Pearson Addison-Wesley. All rights reserved 25-2 2006 Pearson Addison-Wesley. All rights reserved 25-3 Aggregate Demand and Supply How the aggregate
More informationPAPER No. 2: MANAGERIAL ECONOMICS MODULE No.29 : AGGREGATE DEMAND FUNCTION
Subject Paper No and Title Module No and Title Module Tag 2. MANAGERIAL ECONOMICS 29. AGGREGATE DEMAND FUNCTION COM_P2_M29 TABLE OF CONTENTS 1. Learning Outcomes 2. Aggregate Demand 3. Policy Implication
More informationMONETARY POLICY. 8Topic
MONETARY POLICY 8Topic The Central Bank: CB The Federal Reserve System, commonly known as the Fed, is the central bank of the United States. A Central Bank (CB) is the public authority that, typically,
More informationAggregate Demand & Aggregate Supply
Aggregate Demand & Aggregate Supply 1 Aggregate Demand AD = C + I + G + NX The sum of planned consumption, investment, government, and net exports expenditures on final goods and services 2 Aggregate Demand
More informationDifferent Schools of Thought in Economics: A Brief Discussion
Different Schools of Thought in Economics: A Brief Discussion Topic 1 Based upon: Macroeconomics, 12 th edition by Roger A. Arnold and A cheat sheet for understanding the different schools of economics
More informationREAD CAREFULLY Failure to read has been a problem on the exams
Introduction to Agricultural Economics Agricultural Economics 105 Fall 2009 Third Hour Exam Version 1 READ CAREFULLY Failure to read has been a problem on the exams Name Section -3 points for wrong section
More informationAggregate means to add up, aggregation usually implies that the things being added up are similar, but not exactly identical
Macro Short Run AS & Model Essentials Up to this point, our discussions of unemployment, inflation, output, and income have revolved around how we measure theses indicators of economic performance. Now
More informationThe Influence of Monetary and Fiscal Policy on Aggregate Demand
Chapter 32 The Influence of Monetary and Fiscal Policy on Aggregate Demand Test B 1. Of the effects that help explain why the U.S. aggregate demand curve slopes downward the a. wealth effect is most important
More information2. Why is it important for the Fed to know the size and the rate of growth of the money supply?
KOFA HIGH SCHOOL SOCIAL SCIENCES DEPARTMENT AP ECONOMICS EXAM PREP WORKSHOP # 4 > MONEY, MONETARY POLICY, AND ECONOMIC STABILITY NAME : DATE : All About The Ms : 1. What are the three basic functions of
More informationIntermediate Macroeconomic Theory / Macroeconomic Analysis (ECON 3560/5040) Midterm Exam (Answers)
Intermediate Macroeconomic Theory / Macroeconomic Analysis (ECON 3560/5040) Midterm Exam (Answers) Part A (15 points) State whether you think each of the following questions is true (T), false (F), or
More informationINTEREST RATES Overview Real vs. Nominal Rate Equilibrium Rates Interest Rate Risk Reinvestment Risk Structure of the Yield Curve Monetary Policy
INTEREST RATES Overview Real vs. Nominal Rate Equilibrium Rates Interest Rate Risk Reinvestment Risk Structure of the Yield Curve Monetary Policy Some of the following material comes from a variety of
More informationTWO VIEWS OF THE ECONOMY
TWO VIEWS OF THE ECONOMY Macroeconomics is the study of economics from an overall point of view. Instead of looking so much at individual people and businesses and their economic decisions, macroeconomics
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
HW 3 - Macro MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) In the figure above, the SLF curve is the supply of loanable funds curve and the PSLF
More informationAP Macroeconomics review. By: Maria Villasmil. Economis: The study of how people, firms, and government make decisions when faced with scarcity.
AP Macroeconomics review By: Maria Villasmil Economis: The study of how people, firms, and government make decisions when faced with scarcity. Factors of Production: 1)Land: natural resources 2) Labor:
More information2.2 Aggregate demand and aggregate supply
The business cycle Short-term fluctuations and long-term trend Explain, using a business cycle diagram, that economies typically tend to go through a cyclical pattern characterized by the phases of the
More informationConsumption expenditure The five most important variables that determine the level of consumption are:
The aggregate expenditure model: A macroeconomic model that focuses on the relationship between total spending and real GDP, assuming the price level is constant. Macroeconomic equilibrium: AE = GDP Consumption
More informationECO -401 FINAL TERM PAPERS 2008, 2009 & 2010 FILE # 2 FINAL FILE. PAPER # 05
ECO -401 FINAL TERM PAPERS 2008, 2009 & 2010 FILE # 2 FINAL FILE PAPER # 05 Question No: 1 ( Marks: 1 ) A good for which income and quantity demanded are inversely related is known as: Inferior good. Complementary
More informationMacroeconomics 1 Lecture 11: ASAD model
Macroeconomics 1 Lecture 11: ASAD model Dr Gabriela Grotkowska Lecture objectives difference between short run & long run aggregate demand aggregate supply in the short run & long run see how model of
More informationx = %ΔX = rate of change of spending m = %ΔM = rate of change of the money supply v = %ΔV = rate of change of the velocity of money
THE CREDIT MARKET EQUATION: is: x = m + v addresses the question: o What are the causes of changes of spending? o How is it possible for spending to change? o What must happen in order for spending to
More informationEconomics 1012A: Introduction to Macroeconomics FALL 2007 Dr. R. E. Mueller Third Midterm Examination November 15, 2007
Economics 1012A: Introduction to Macroeconomics FALL 2007 Dr. R. E. Mueller Third Midterm Examination November 15, 2007 Answer all of the following questions by selecting the most appropriate answer on
More informationA Macroeconomic Theory of the Open Economy. Chapter 30
A Macroeconomic Theory of the Open Economy Chapter 30 Key Macroeconomic Variables in an Open Economy The important macroeconomic variables of an open economy include: net exports net foreign investment
More informationAggregate Demand I, II March 22-31
March 22-31 The Keynesian Cross Y=C(Y-T)+I+G with I, T, and G fixed Government-purchases multiplier Y/ G (if interest rate is fixed) Tax multiplier Y/ T (if interest rate is fixed) Marginal propensity
More informationIntroduction. Learning Objectives. Chapter 11. Classical and Keynesian Macro Analyses
Chapter 11 Classical and Keynesian Macro Analyses Introduction The same basic pattern has repeated four times in recent U.S. history: 1973-1974, 1979-1980, 1990, and 2001. First, world oil prices jump.
More informationMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
Econ 330 Spring 2015: EXAM 1 Name ID Section Number MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) If during the past decade the average rate
More information