Econ 104 1st Edition Lecture 14 Outline of Last Lecture II International Business Cycle III Aggregate Demand Outline of Current Lecture IV RGDP Business Cycle V Loanable Funds Supply and Demand Current Lecture I II III The Financial Crisis and Great Recession of 07 09 a Domestic and Foreign investors lost i 7 Trillion in stock market wealth ii 7 Trillion in real estate wealth RGDP Business Cycle Periods of growth and contraction a Business cycle indicators i Also have cycles data released more frequently than RGDP ii Use by forecasters to predict RGDP b With increased globalization i Shocks that cause business cycles are easily transmitted to ROW 1 ROW rest of world Demand for loanable Funds a Negatively related to real interest rate r b An increase in demand for loanable funds is a shif i As real GDP rises 1 Firms are more willing to borrow due to improved business outlook 2 Households are more willing to borrow because an increase in RGDP implies a Increase in HH incomes b Improved employment outlook 3 Technological Change or decrease in corporation taxes a Firms will increase demand for loanable funds to finance investment 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 Increase in investment increases economic growth IV V Supply of loanable funds a Positively related to real interest rate b An increase in supply of loanable funds i Federal Reserve increases the supply of funds by increasing the money supply ii A government budget surplus T G 0 1 Increases government savings iii An increase in HH savings due to a decrease in income taxes Loanable Funds Market a Represents the many markets in the financial system b Demand of loanable funds determine the real interest rate c Shifs in demand and supply of loanable funds will have an effect on the level of real interest rate in the economy
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