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ECON202 - Lecture 3 - Unemployment rate i 5.1 ECON202 Class...

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ECON202 Class Notes April 8, 2008; Lecture 3 1) Macroeconomics a) Federal government controls rate at which banks loan to each other i) Federal bank buy and sell bonds to private banks to take money out of circulation (1) Market determines price of bonds ii) Congressional mandate (1) Price stability at maximum employment b) What is the Federal Reserve target rate? i) 2.25% c) Federal Funds rate i) Rate that banks loan to each other d) FOMC i) Meet every 6 weeks ii) Members (1) Presidents of Reserve banks are members (2) 12 federal reserve districts (3) 5 serve at one time (4) 7 governors (5) Ben bernankey? (6) Now bail out investment banks e) What percent of GDP is comprised of final consumption of goods i) 70% f) Arbitrage i) Buy low and sell high based on opportunity and cost ii) Exports increase with decrease with falling dollar g) Unemployment rate
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Unformatted text preview: Unemployment rate i) 5.1% ECON202 Class Notes April 8, 2008; Lecture 3 h) Inflation rate i) Measures the percent increase in the price index ii) 2.4% is the core index inflation rate iii) Most volatile (1) Food (2) Energy iv) Milton Freeman (1) Inflation is always and everywhere a monetary phenomenon i) Market i) Supply (1) Determined by firm (a) Firms try to maximize profit ii) Demand (1) Determined by consumers (a) Consumers try to maximize utility iii) Q= D(P) (1) Q is quantity (2) D is demand (a) Downward slope (3) P is price (4) Price increase yields decrease quantity j) Marginal Principal i) Marginal benefits = Marginal Cost (1) Optimization (a) Set price at marginal cost k) Average increase in GDP ECON202 Class Notes April 8, 2008; Lecture 3 i) 2.2%...
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