Econ 104 1st Edition Lecture 14Outline of Last Lecture II. International Business Cycle III. Aggregate Demand Outline of Current Lecture IV. RGDP Business CycleV. Loanable Funds: Supply and Demand Current LectureI. The Financial Crisis and Great Recession of 07-09a. Domestic and Foreign investors losti. $7 Trillion in stock market wealth ii. $7 Trillion in real estate wealth II. RGDP Business Cycle: Periods of growth and contraction a. Business cycle indicatorsi. Also have cycles; data released more frequently than RGDPii. Use by forecasters to predict RGDPb. With increased globalization:i. Shocks that cause business cycles are easily transmitted to ROW 1. ROW = rest of worldIII. Demand for loanable Fundsa. Negatively related to real interest rate (r) b. An increase in demand for loanable funds is a shifi. As real GDP rises1. Firms are more willing to borrow due to improved business outlook2. Households are more willing to borrow because an increase in RGDP impliesa. Increase in HH incomesb. Improved employment outlook3. Technological Change or decrease in corporation taxesa. 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. Supply of loanable funds a. Positively related to real interest rateb. 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) > 01. Increases government savings iii. An increase in HH savings (due to a decrease in income taxes)V. Loanable Funds Marketa. Represents the many markets in the financial system b. Demand of loanable funds determine the real interest ratec. Shifs in demand and supply of loanable funds will have an effect on the level of real interest rate in the
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