Consumption Forumla
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C= Ca+ MPC(Y)
Consumption= Autonomous Consumption + Marginal Propensity to
Consume * Income
,Unemployment Rate=
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(Unemployed/ Labor Force) * 100
In the loanable funds market, national savings (S) does not depend on real interest
rates (r) so the supply curve is
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fixed (vertical)
Classical Dichotomy
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the theoretical separation of real and nominal variables in the classical
model, which implies nominal variables do not affect real variables
r is the
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real interest rate, adjusts for inflation
,The value of the final goods already include the value of ____________ ______, so including
____________ ________ and final goods into GDP would be double counting
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intermediate goods
Reserve-Deposit Ratio (rr)=
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R/D; reserves divided by deposits: depends on regulation and banks
policies
Hyperinflation
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π greater than or equal to 50% per month. Money ceases to function as a
store of value, and may not serve its other functions
Change in Aggregate Income (Y) =
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, Elasticity of output with respect to capital*(▵K)+ Elasticity of output with
respect to labor (▵L)
I.e... Production Function: F(K,L)=K^(1/3) L^(2/3)
Labor Decreases by 20% Capital Decreases by 20%
Ya=100
▵Y= (1/3)*(-20)+ (2/3)(-20)
= -6.67% + -13.33%
= -20%
Y decreases by 20% (100*-20)= 20
100-20= 80
Yb=80
Real Money Demand L(i,Y) depends
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-Negatively on i (i is the opportunity cost of holding money)
-Positively on Y (higher Y increases spending on goods and services, so
increases need for money)
Why doe governments create hyperinflation
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when a government cannot raise taxes or sell bonds, it must finance
spending increases by printing money
In the closed economy model, output is determined by
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C= Ca+ MPC(Y)
Consumption= Autonomous Consumption + Marginal Propensity to
Consume * Income
,Unemployment Rate=
Give this one a try later!
(Unemployed/ Labor Force) * 100
In the loanable funds market, national savings (S) does not depend on real interest
rates (r) so the supply curve is
Give this one a try later!
fixed (vertical)
Classical Dichotomy
Give this one a try later!
the theoretical separation of real and nominal variables in the classical
model, which implies nominal variables do not affect real variables
r is the
Give this one a try later!
real interest rate, adjusts for inflation
,The value of the final goods already include the value of ____________ ______, so including
____________ ________ and final goods into GDP would be double counting
Give this one a try later!
intermediate goods
Reserve-Deposit Ratio (rr)=
Give this one a try later!
R/D; reserves divided by deposits: depends on regulation and banks
policies
Hyperinflation
Give this one a try later!
π greater than or equal to 50% per month. Money ceases to function as a
store of value, and may not serve its other functions
Change in Aggregate Income (Y) =
Give this one a try later!
, Elasticity of output with respect to capital*(▵K)+ Elasticity of output with
respect to labor (▵L)
I.e... Production Function: F(K,L)=K^(1/3) L^(2/3)
Labor Decreases by 20% Capital Decreases by 20%
Ya=100
▵Y= (1/3)*(-20)+ (2/3)(-20)
= -6.67% + -13.33%
= -20%
Y decreases by 20% (100*-20)= 20
100-20= 80
Yb=80
Real Money Demand L(i,Y) depends
Give this one a try later!
-Negatively on i (i is the opportunity cost of holding money)
-Positively on Y (higher Y increases spending on goods and services, so
increases need for money)
Why doe governments create hyperinflation
Give this one a try later!
when a government cannot raise taxes or sell bonds, it must finance
spending increases by printing money
In the closed economy model, output is determined by
