Cheatsheet_final - -GR(e)=GR(Pf)-GR(P) -GR(M)+GR(V)= GR(P)...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
--GR(e)=GR(Pf)-GR(P) --GR(M)+GR(V)= GR(P) – GR(Y) …… GR(X) is gr of X?means M=money suppy V=velocity --adv standard living=ratio output to population….if stand living Dec. then output must be dec. --Next X low when real exchange rate is high --Next Xports high when RER low --High real exchange rate leads to domestic produces difficulty exporting. Foreign goods sell well --‘e’ increase—home currency stronger --Demand for money is—the amount of wealth an individual chooses to hold in the form of money --fed funds rate is interest rate between commercial banks --an undervalued exchange rate is an exchange rate:that has officially fixed value less than it fundamental value. --0according to the equation of exchange, if the income velocity of money is constant and if output is constant ten it is always tru that the ration of money supply to the price level is constant. NOT the ratio of the money supply to the level of output is constant. --holding all else constant, a decrease in the real interest rate on Mexican assets will decrease the supply of dollars in the foreign exchange market and increase the equilibrium Mexican peso/US dollar exchange rate --in short run Keynesian model to close exactly a recessionary gap of 50 billion dollars, govt policies can be designed to have autonomous consumption expenditure:::incrase by less than 50 Billion --When the fed eases US monetary policy (becomes more expansionary), domestic bond prices rise; causing the equilibrium exchange rate value of the dollar to fall; resulting in a increase in net exports --using aggregate demand and supply cures, and increase in nominal money supply will increase output in the shortrun but leave price unchanged. --overvalued currency can be maintained only until international reserves are exhauseted --in short run when output is greater than PAE, PAE is less than actual investment --Holding all else constant, an increase in US GDP will increase the supply of dollars in the foreign exchange market and decrease the equilibrium of the
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/29/2008 for the course FCE 238 taught by Professor Boyce during the Fall '07 term at Michigan State University.

Page1 / 2

Cheatsheet_final - -GR(e)=GR(Pf)-GR(P) -GR(M)+GR(V)= GR(P)...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online