Intro. 001

Intro. 001 - all we spend = all we bought Apply a little...

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ECO 473 Dr. Dennis Foster – Fall 2010
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Why do we need money?         Big Question: Can we not have money? Big Question: Can we not have money?
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Why do we need banks?         How do you access funds? Big Question: Can we not have banks? Big Question: Can we not have banks?
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How does money relate to  economic policies? Circular flow model. Equation of exchange. Monetary policy.
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The circular flow model People (households) Businesses Factor markets Output markets Real Flows Money Flows saving borrowing
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The Equation of Exchange M • V = P • Q (money) x (velocity) = (price) x (quantity)
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Unformatted text preview: all we spend = all we bought Apply a little calculus . . . %ΔM + %ΔV = %ΔP + %ΔQ money growth + spending habits change = inflation + real economic growth Monetary Policy • Conducted by the Federal Reserve (FED) • Controls the quantity of money available. • Uses control, primarily, to: – fight inflation by M . . . what happens? – fight unemployment by M . . . what happens? Big Question: What causes inflation/unemployment? Big Question: What causes inflation/unemployment? Money & Banking ECO 473 Dr. Dennis Foster...
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This note was uploaded on 10/22/2010 for the course ECO 473 taught by Professor Foster during the Spring '07 term at N. Arizona.

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Intro. 001 - all we spend = all we bought Apply a little...

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