Termsfinal - Absorption:Cd Id Gd total spending by domestic...

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Absorption:Cd+Id+Gd, total spending by domestic residents, firms and governements. Adaptive Expectations: people form expectations about the future based on the past. put smaller  and smaller weights on events further back in time, more weight on recent events. Business Cycle chronology: a detailed history of business cycles, maintained by NBER. Business Cycles: alternating periods of economic growth and contraction. A single business  cycle would have 4 parts, trough,recovery,peak,recession. Calibration:1. write specific production and utility functions 2. use existing micro studies and  macro data to choose numbers for parameters 3. simulate what happens when economy is hit  by various shocks. Conditional Convergence: countries converge to their own steady states, which are determined  by the saving rate, the population growth rate and growth rate of labor efficiency. Crowding Out: Classical economist believe that when government finance a deficit, the  expansionary/contractionary effects are not fully realized. If the government sells bonds to  finance an expansionary fiscal policy, it is taking away funds from a possible private investment  undertaking. therefore an increase in G is offset by a decrease in I. Currency Board: is a monetary policy under which the supply of domestic currency is strictly  limited by the amount of foreign currency held in reserves. GDP Deflator: a price level measure, calculated as the ratio of current nominal GDP to current  real GDP. Government Spending multiplier: A dollar increase in G will yield (change G over 1-MPC  increase in Y. (change Y / change G) = 1 / (1-MPC). Great Moderation: after 1984 business cycles have had a large drop in volatility. this can be 
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This note was uploaded on 05/14/2008 for the course ECON 3020 taught by Professor Mertens during the Spring '08 term at Cornell.

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Termsfinal - Absorption:Cd Id Gd total spending by domestic...

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