MONEYCLASS

MONEYCLASS - Money, Banking and the Financial System...

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1 1 Money, Banking and the Financial System Python, history of money, majors 47 slides 2 In the News? 3 Course Issues b Clicker Registration – if not, must see me b Gradebook/ email ‘warnings’ coming b Online Midterm–Wednesday 10/26 4pm - Friday 10/28 8pm – Must be taken in 1 hour window during this period. COVERS weeks 1-8 in 50 multiple choice questions covering material from these weeks. s Study big qs, hw, slides b Investment Game 2 up – learn lots more b How to study/learn/grow wealthy b How to get help – class, chat rooms, LRC b ODE b Economics Career panel Thursday, October 13 from 6 to 8pm in the Student Activities Center, Raritan River lounge.
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2 4 Where Are We? The Keynesian Model s 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 s 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) s Shifts in aggregate demand (and sometimes aggregate supply) cause business cycles: recessions/depressions s Aggregate D = C+I+G+X-M b increases in any of these shift aggregate D curve by a multiple s 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. – a movement down along the aggregate supply curve b changes in wages, costs of production, technology shift SR aggregate supply curve s 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 p,y and T->Y-T->C->D etc s 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 s Wealth effect W up->C up->D up->p,y up s Paradox of thrift : S up -> C down ->D and p,y down in SR (LR Sup->I up) 5 Advantage of a Money Economy? s Increases Economic Efficiency b Lowers Transactions And Information Costs s Versus Barter Double Coincidence Of Wants s 5 Goods, 9 Barter Prices b Ab Ac Ad Ae Bc Bd Be Cd Ce s 5 Money Prices $A $B Etc b Allows Specialization And Division Of Labor s Increasing Production And Exchange b Allows Development of Financial System s Channeling Of Saving Into Investment s Allows Separation Of Saving And Investment decisions 6 What is the difference between money and wealth? Money and Income? s
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MONEYCLASS - Money, Banking and the Financial System...

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