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lecture 03.02

lecture 03.02 - Money is something that fulfills Unit of...

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1. Deficit 2. Critique: FP 3. Money a. Def. b. Types c. M.M d. MP Tools e. D&S f. Critique 1. deficit vs debt flow vs stock D t = (G t – G * )- (T t – T * ): cyclical deficit = +G * - T * : structural deficit (is more of the concern and occurs even if the economy is perfect) G * government expenditure when everything is perfect G = g 0 + g 1 (Y * - Y), deficit increases then the government increases expenditure (counter cyclical policy) T = T 0 + t(Y * - Y) Structural deficit in this case would be g 0 – T 0 because the potential (*) will be 0 2. Critique FP Crowding out Trade deficit
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Political Business Cycle Lags Recognition lag Implementation Efficiency 3. Money
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Unformatted text preview: Money is something that fulfills: Unit of count Medium of exchange Store of value Grenshen’s law bad money circulates good money, drives out good money Types of money Commodity money – seashell, rabbit skin Fiat money High money M0 M1 = M0 + Checking Account (CA) M2 = M1 + Small Saving accounts Small: 100,000 or less because FDIC allowed under 100,000 (now is 250,000) MM how you can choose your assets to reduce risks but increase yields Assume 1. Holds no cash 2. Hold only checking accounts 3. Banks always fully lend out...
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