Lecture 2.4.08

Lecture 2.4.08 - Real I rate= Nominal I rate inflation rate...

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Production function: the relationship between real GDP and the quantity of labor employed (ceteris paribus) Ppf middle Shape of PPF translate to increase in opportunity cost, when producing initial output labor small increase, however more labor on the work force u get less output As one change capital stock there would be a shift in PPF Capital stotck – the total # of plan equipment buildings and business inventories Market for Loanable Funds – market in which households, firms, governments, banks, and other financial institutions borrow and lend. Nominal Interest Rate – the # of dollars that a unit of capital earns
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Unformatted text preview: Real I rate= Nominal I rate inflation rate 3% = 5% - 2% means 3% more goods and services Nominal has to be > 0, real can be if inflation is very high Demand for loanable funds the relationship between the quantity of loanable funds demanded and the real interest rate (CP) As real interest rate goes up less profitable hence the graph has a sorta like demand curve Real interest rate as the cost of borrowing Supply of loanable funds quantity loanable funds supplies vs interest rate Higher interest rate more funds available to be borrowed, normal upward sloping supply curve...
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