UW-Madison ECON 102 - The Great Recession, Interest Rates, Monetary Policy (7 pages)

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The Great Recession, Interest Rates, Monetary Policy



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The Great Recession, Interest Rates, Monetary Policy

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The Great Recession, Interest Rates, Monetary Policy


Lecture number:
20
Pages:
7
Type:
Lecture Note
School:
University of Wisconsin, Madison
Course:
Econ 102 - Principles of Macroeconomics
Edition:
1
Documents in this Packet

Unformatted text preview:

Econ 102 1st Edition Lecture 20 Outline of Last Lecture I Chapter 14 Outline of Current Lecture I General Info II The Great Recession III 14 4 Interest Rates and How they Change Investment Output GDP IV 14 5 Monetary Policy Challenges for the Fed V Film Glossary Current Lecture I General Info a Use Exam Content Folder to study for the final b Gwen will have 2x the office hours returning from thanksgiving break II The Great Recession a Information on Great Recession in Chapter 13 14 b The applications pull all those things together c Traditional Open market i increased bank reserves ii pushing on the string problem iii thus Federal Reserve dropped the Reserve requirement These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute 1 Didn t change anything because Banks were already saving more than they needed to d So they lowered the discount rate i we ll lend to you with no interest ii still banks didn t want to lend 1 might not be able to pay back the loan 2 didn t want to take any chances iii People are nervous about the short term but trusting of the long term credit markets 1 people aren t as nervous about the future 2 application in chapter 14 3 Reserves rescue the banks 4 just giving them money a Because they are the infrastructure of the economy iv for 2 days the banks froze and made NO LOANS 1 no capital deepening 2 no control of money supply III 14 4 Interest Rates and How they Change Investment Output GDP a Figure 14 5 i If you can get investment to change you can get aggregate demand to change ii This investment is short term stuff 1 ex paying debt over night 2 therefore no affect on capital deepening iii Aggregate Demand Curve shifts right 1 increases GDP 2 very Keynesian no long run b Study Page i Open market bond purchases increase in money supply 1 the checks they add to bank adds to the bank reserves allows banks to play with the money loans 2 Fall in



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