UW-Madison ECON 102 - Review for Final Exam (6 pages)

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Review for Final Exam



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Review for Final Exam

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Review for Final exam; Chapters 9, 10, 13, 14, 15 & The Inside Job video.


Lecture number:
25
Pages:
6
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 25 Outline of Last Lecture I Chapter 15 cont II Review Fiscal Policy Outline of Current Lecture I Review for Final Current Lecture I Review for Final a Chapters 9 10 13 14 15 The Inside Job video i Nothing about reserve float b Multiple choice 15 points Short answer 10 points c Exam Locations in Content Folder i Penalty for going to the wrong room ii Know your discussion section and TA d Student Questions i Reasons that expansionary monetary policy may be like pushing on a string 1 Banks may accumulate excess reserves rather than make loans if a Times are risky Keynesian Model people get panicky b Productivity is low classical model GDP and investment spending fall because productivity is lower 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 i both very likely to happen during recessions c During the Great Recession the FOMC i engaged in direct lending by purchasing Mortgage Backed Securities bypassed the banking system ii Bought long term securities not just usual short term ones to try to affect long term interest rates thinking that banks would view long term risk longproductivity as solid 1 this is known as Quantitative Easing 2 One problem with normal open market operations is that they only affect short term interest rates and those may not be very important in affecting Aggregate Demand AD a Quantitative Easing during the Great Recession addressed this problem 3 It might be difficult to affect interest rates if we are in a liquidity trap liquidity trap exists if there had already been as much lending as the market can absorb and interest rates are as low as they can go a During the Great Recession the FOMC i Offered interest rates on reserves held by banks Banks wouldn t make loans to households or firms that gave interest rates lower than the ones they earned on reserves 1 Imagine 2 interest rate on reserves by leaving it in



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