econ review - Role of fed in changing economyDemand and...

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Role of fed in changing economy- Demand and supply- y- GDP income P- Price level CPI INF- inflation U- Unemployment r- Real interest rate i- Nominal interest rate I- investment X- export M- import TD- trade deficit BD- Budget deficit (spending and taxes) ND- national debt Aggregate Demand/Supply Aggregate Demand shifters- fiscal policy (government spending), monetary policy, consumer confidence, wealth effect Expansion is a shift to the right Contractionary shifts to the left Aggregate Supply Shifters- Wages, oil prices. Oil prices- if prices go up, shifts supply to the left Government increases spending- comes from borrowing; Investment- increases Export- no change Import- lower income, we buy less goods.
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Unformatted text preview: Trade deficit- increases Budget deficit- increases National deficit- increases FEDERAL RESERVE BANK (FED) Fed purchases government bonds in open market operation (Expansionary) AD line shifts to the right More money in the economy makes interest rates go down y- increase p- increase inf- increase u- decrease r- decrease i--decrease I- increase X- no effect M- increase TD- increase BD- decrease ND- decrease Clinton-Greenspan – expansionary monetary policy, resulted in a budget surplus OPEC increases oil prices- y- decreases p- increases inf- increases u- increases r- increases i-increase I-decreases x- no change M- decrease TD- decrease BD- increase ND- increase...
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