Econ 2305: Mixed
32 Cards in this Set
| Front | Back |
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Nominal Variables
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$ Money or Price Cost
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Real Variables
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Real Physical Cost
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Relative Price
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Physical cost too
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Velocity
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=Price of Output x Quantity of Output / Quantity of Money
=P x Q / M
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Price Level
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=Quantity of Money x Velocity of Money / Quantity of Output
=M x V / Y
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Impact of gov.s decisions to raise revenue by printing money has on the value of the money in Eleanors wallet is known as
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Inflation Tax
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Nominal Interest Rate
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Real Interest Rate+Inflation Rate
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NIR
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=RIR+INFLR
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After-Tax Nominal Interest Rate
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=NIR-(INFLR*NIR)
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After-Tax Real Interest Rate
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=After-Tax NIR-INFR
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Expected Real Interest Rate
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=NIR-Expected IR
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Actual Real Interest Rate
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=NIR-Actual INFLR
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3 Ways to Get GDP:
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=C+I+G+(X-M)
=C+I+G+NX
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If Fed prints more money
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Prices go up
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The Fisher Effect
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NIR=Infl+RIR
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The Fisher Effect is when
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INFL GOES UP
NIR GOES UP
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QUANTITY EQUATION
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M*V=P*Y
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QUANTITY EQUATION EFFECTS:
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IF Money goes UP-->Price goes UP
IF Money & Velocity goes UP-->Price & Y(output) UP
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Price & Value
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Price Level goes Up
Value of Money goes down
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4 Tools of Central Bank Uses to Control MS
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Direct Loaning to Banks
Reserve Requirements
Open Market Operations
Paying Interest on Reserves
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Tax Distortions
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=Inflation makes Nominal grow faster than Real Income
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Real Wage
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Unchanged
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Assets
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Reserves
Loans
Securities
(RLS)
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Liabilities
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Deposits
Debt
Capital Owners Equity
(DDC)
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Trade Surplus
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X > M
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Trade Deficit
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M > X
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Trade Deficit
effects:
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X < M
NX < 0
Y<C+I+G
S < I
NCO < 0
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Balanced Trade effects:
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X = M
NX=0
Y=C+I+G
S=I
NCO=0
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Trade Surplus effects:
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E > M
NX > 0
Y > C+I+G
S > I
NCO > 0
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Real Expected Rate
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=NER*DP/Foreign Price
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E
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e x p / p*
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3 Facts Fluctuations:
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Econ Fluctuations are irregular & unpredictable
Most Macroeconomic Quantities Fluctuate together
As outputs falls unemployment rises
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Econ 2305: Mixed