Lecture 9_money2009

Lecture 9_money2009 - In todays Australian (12/5/2009)...

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In today’s Australian (12/5/2009) Slide 1
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Slide 2 Last lecture Equilibrium in AD-AS space Inflation, real growth and changes to U all individually possible but also possible together Also introduced LRAS and concept of full employment equilibrium Inflation also possible from the AS side sometimes accompanied by U – called stagflation Growth and stable prices only possible if AD and LAS grow at same pace
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Slide Slide 3 Growth without inflation AD and LAS growing at the same rate so that there is growth but no inflation Difficult task for policy makers to achieve right policy-mix in face of exogenous influences e.g. drought, WA resources boom etc
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Slide Slide 4 Ratchet effect for AD rise Shifting AD curves result in higher prices and growth but…
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Slide Slide 5 Ratchet effect for AD fall …subsequent fall in AD does not return economy to old equilibrium For example, a fall in from AD3 to AD2 does not return economy to P2 and Y2 but to P3 and Y” Y2
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Slide Slide 6 Price Inflexibility Causes: Wage inflexibility Employers’ interests Monopoly power Menu costs
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Slide Slide 7 Multiplier and the Price Level The same increase in AD has different impacts on GDP. . …. multiplier getting smaller and … …. disappearing
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Slide Slide 8 GPL changes and the Multiplier Shifts of AD in the Horizontal range = Full multiplier effect Intermediate range = Reduced multiplier effect Vertical = No multiplier effect
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Slide 9 This lecture What is money? Early forms of money Modern money Money in Australia Credit creation What gives money value? Money demand Money market & interest rate determination
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Slide 10 The Functions of Money What is money? Money is what money does Medium of exchange Buying and selling goods and services Unit of account Assisting measurement of relative worth of various goods, services and resources Store of value A form in which to store wealth, due to its liquidity and convenience
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Slide 11 Early money Barter Goods exchange for goods ‘double coincidence of wants’ Primitive money Salt, skins, round stones , cigarettes
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Slide 12 Early money Precious metals Gold, silver & bronze –goldsmiths were early bankers Value destabilised when commodity value fluctuates relative to value as money Gresham’s Law ‘bad money drives out good money’ Debasement (e.g. ‘sweating’, ‘clipping’, official revaluation/debasement) lead to inflation
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Slide 13 Early paper money Early notes = deposit receipts Initially like ‘cloakroom tickets’ – value of
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This note was uploaded on 10/19/2011 for the course ECON 1007 taught by Professor Macroeconomics during the Three '08 term at South Australia.

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Lecture 9_money2009 - In todays Australian (12/5/2009)...

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