econ205jan22

econ205jan22 - ECON 205 January 22, 2008

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ECON 205 January 22, 2008 Federal Funds Rate, overnight borrowing of banks from each other. 4.25%, Today the federal reserve cut that rate to 3.5%. Discount Rate: rate at which fed (Bank of the banks) loans money to banks. Fed lowered this by .5%, now at 4%. Economic Models PPF Production Possibility Frontier (or PPC, Production Possibility Curve) shows the limits of the country in terms of goods and services PPF Food Fun 10 0 8 1 6 2 4 3 2 4 0 5 Can graph it too. .. Opportunity Cost: real cost of achieving something (you have to give up units of fun to have food, and vice versa the ratio is called relative prices basically everything we are trading off, we cannot have everything that we want Also called 'Terms of Trade' To have economic growth, we need more economic resources (more labor, land, capital). also trade with other countries. Constant opportunity cost PPF, the Ratio between food and fun is constant 2 for 1 Absolute Advantage: compares countries based on cost of making goods Comparative Advantage: compares countries based on opportunity costs
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This note was uploaded on 02/19/2009 for the course ECON 20091_ECO taught by Professor Mohammadsafarzadeh during the Spring '09 term at USC.

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econ205jan22 - ECON 205 January 22, 2008

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