ECON 202 Test 2 Study - ECON 202 Exam 2 Study Guide Formula...

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ECON 202 Exam 2 Study Guide Formula of Exchange M*V=P*Y Money *money velocity = price*output (nominal GDP) (M/P)*V=Y Money supply (P*Y)/M= V Planned Aggregate Expenditure: Total planned spending on final goods and services PAE= C+Ip+G+NX C, gov, and NX , planned is actua PAE=(MER)*Y+AP Marginal Tax Rate=ΔT/ΔY Simple real interest= New Purchasing power - Old Old Purchasing Power Consumption Function: C=C’+c(y-t) MPC= ΔC/ΔYd—(y-t) MPCy= ΔC/ΔY Private saving=(Y-t)-C Public Saving=T-G National Saving=Y-C-G Multiplier= 1/(1-MER) Actual Interest=planned +unplanned Unemployment: Frictional: short term, voluntary, searching for new/beter job Structural:Long term, mismatch of skills, involuntary Cyclical:   Extra unemployment during periods of recession, Positive during recessions only . Long run: prices are flexible, output and employment are always at their natural rates, and the classical theory applies Short run: prices are sticky; shocks can push output and employment away from their natural rates FED: 12 regional banks Board of Governors: -7govs appointed to 14 staggered terms -chair of board for 4 years FOMC: 8 times a year determines monetary policy -7 gov, pres of NY, 4 other pres of fed banks Possible Exam Type questions: Annual Interest payment The annual interest payment  is equal to the coupon rate  multiplied by the principal  value of the bond; that is,  $2000*.06 = $120. Win Lottery, Wiling to accept today Present value, V0, is determined by: V1 = V0*(1+i), where V1 is the future value one year into the future and i is the promised interest rate. Bank Reserves If there is $24 million of cash in existence with $20 million of it held in bank vaults as reserves, then the cash in the hands of the public is the difference, or $4 million, which is part of the money supply. In addition, if bank reserves are $20 million and if the required reserve to checking deposit ratio is
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ECON 202 Test 2 Study - ECON 202 Exam 2 Study Guide Formula...

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