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Unformatted text preview: 1 1 Money, Banking and the Financial System Â¡ Python / banking? 2 In the News? Â¡ 3 Course Issues Â¢ Clicker Registration and Update (list) Â¢ Online Midterm Â¡ will start Wednesday March 10 at 7pm and end Thursday March 11 at 9pm Â¡ Covers weeks 1-7 Â¡ Study big qs, hw, slides Â¡ (H1 â€“ part 2 Thursday 3/11) Â¢ Investment Game 1â€“ Clicker Qs next week Â¢ How to study/learn/grow wealthy Â¢ How to get help Â¢ Jeffrey Miron coming 2 4 Where are we? The Keynesian Model Â¡ P=overal level of prices, y=real GDP=output=income C=consumption I=investment in plant and equipment G=government spending X=exports M=imports Y-T=disposable income r=interest rate (i if I make a mistake) Ms=money supply Â¡ Aggregate Demand & Supply (D&S) determine y (y=real output=real gdp; real means it measures physical production=output=income) and P (aggregate price level and inflation) Â¡ Shifts in aggregate demand (and sometimes aggregate supply) cause business cycles: recessions/depressions Â¡ Aggregate D = C+I+G+X-M Â¢ increases in any of these shift aggregate D curve by a multiple Â¡ Later - Short-run aggregate S curve reflects wages, costs, technology , etc. An decrease in aggregate demand in the short-run will result in decreased production and output. â€“ a movement down along the aggregate supply curve Â¢ changes in wages, costs of production, technology shift SR aggregate supply curve Â¡ Fiscal policy (changes in federal government spending and/or taxing for stabilization purposes - G,T) shifts aggregate demand and thus y,P i.e. G-> D â†’ p,y and T->Y-T->C->D etc Â¡ Monetary policy : Money Supply (controlled by Fed) increases -> interest rates fall -> Investment (in plant and equipment) increases -> aggregate Demand increases (by a multiple) -> output and prices increase i.e. Ms up->r down->I up->agg D up->P,y up Â¡ Wealth effect W up->C up->D up->p,y up Â¡ Paradox of thrift : S up -> C down ->D and p,y down in SR (LR Sup->I up)...
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This note was uploaded on 09/30/2011 for the course ECONOMICS 103 taught by Professor Sheflin during the Spring '08 term at Rutgers.
- Spring '08