Econ 2105 Principles of MacroeconomicsDr Grace OChapter outline for exam 3Chapter 13. Fiscal Policy- Small government and Big Government: what about U.S. government?- Sources of tax revenue, Category of Government Spending - Fiscal policy using Tax (T) and Government spending (G)- Expansionary fiscal policy to close a recessionary gap- Contractionary fiscal policy to close a inflationary gap- Sequestration- Multiplier effect- Marginal Propensity to Consume- Government Spending multiplier: ΔAD = ΔG × 1/ (1- MPC)- 4 Limits to Fiscal Policy - Crowding out effect- Ideal case (mostly agreed upon): budget deficit allowed during recession, and paid backduring expansion.- Budget Balance, Surplus, Deficit- History of U.S. government budget- National Debt (Debt held by public, Public debt standing): how much?- National Debt as a % of GDP, by country, by time, ownership of public debt, interestpayment- How are they different? Greece, Japan, U.S. vs Sweden, Norway- Implicit LiabilitiesChapter 14. Money, Banking, and the Federal Reserve System- Meaning of Money: as a legal tender- Three roles (functions) of Money- Other instruments which have similar roles of Money- Commodity Money, Fiat Money, Commodity Backed Money: Gold Standard- Money Supply: M1, M2- Monetary base- Creation of Money: Money Multiplier = 1/rr- Role of bank (financial intermediary): Match.com / Chemistry.com /eHarmoney.com- Bad Bank from Planet Money (http://www.thisamericanlife.org/radio-archives/episode/375/bad-bank)- Bank reserves and reserve ratio- Fractional Banking system- Bank Regulation: Reserve requirement, Deposit insurance, capital requirement- Bank Run = Liquidity Crisis: Bank Run: 119 banks failed in 2009, (zero in 2005),CP holders flight from banking system, even with FDIC insurance, up to$250,000- Insolvency Issue- Leverage Ratio = Bank Asset / Bank Capital- Federal Reserve System: central bank, 12 banks, overseeing and regulatingbanking system, control/monitor monetary base 1Econ 2105 Principles of MacroeconomicsDr Grace OChapter 15. Monetary Policy - Money demand and money supply in money market- Federal funds rate- How to set federal funds rate- How expansionary monetary policy
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