Test 2 Study Notes

Test 2 Study Notes - Aggregate Demand: - Monetarist: o...

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Aggregate Demand: - Monetarist: o Accounting identity is the equation of exchange o MV=Py o Money supply x Money velocity = nominal GDP= price level x real GDP o Money velocity is the number of times a dollar is used to buy a finished product in a year o V= Nominal GDP/Money Supply - Keynesian o Expenditure approach o AD= C+I+G+X-IM o Aggregate demand = consumer spending + investment + government spending + exports – imports - Determinants of Aggregate Demand: o Monetary Policy Expansionary (OM purchase) (+) Contractionary (OM sale)(-) o Fiscal Policy Government Spending goes up so does AD Net taxes go down, AD goes up o Expectations Consumer confidence goes up so does AD Business confidence goes up so does AD o Foreign Economic Growth When other countries have more money, exports go up and so does Aggregate Demand o Exchange Rate When the dollar is weak, US and other countries buy more domestic goods. Exports increase and Imports decrease so AD goes up. -
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This note was uploaded on 07/17/2008 for the course ECON 2035 taught by Professor Stahl during the Summer '08 term at LSU.

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Test 2 Study Notes - Aggregate Demand: - Monetarist: o...

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