Revision_2009 - Housekeeping Ken Revision lecture This...

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Slide 1 ‘Housekeeping’ Ken Revision lecture This lecture theatre 10a.m Next Thursday (18 June) Please fill in CEI
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Slide 2 Models in this course Measuring economic activity AE model Multiplier Money market AD – AS Model Foreign sector Exogenous ‘Shocks’ Monetary policy Fiscal policy Inflation supply side & growth
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Slide 3 Measuring economic activity 1 Real GDP measures economic activity Production & E on goods and services (g & s) involves households, firms, Government & foreigners GDP requires resources most importantly human resources so helps us explain U Government involvement suggests management of the macroeconomy (Fiscal & monetary policy; management of BOP)
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Slide 4 Measuring economic activity 2 Real GDP is money GDP corrected for inflation Value added Avoid double counting GDP = E = Y (very important conclusion which is central to understanding theory) Real GDP neither complete measure of economic activity nor a good measure of welfare Labour market measures GPL and rate of inflation 10 MCQs covering contents of Chaps 4 & 5 particularly: definitions, issues about & measurement of GDP, inflation, BOP, real vs nominal/money valuation, labour market concepts
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Slide 5 Models in this course
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Slide 6 Determinants of E pages189-201 Pages 201-9 Pages 229-36 Pages 237-41
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Slide 7 Determinants of E Equation for E line Intercept term captures I, G, X as well as lump sum taxes and autonomous imports and … ..changes in these shift the E curve Slope term = MPC adjusted for effect on C of income taxes and imports
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Slide 8 Graph of equilibrium for a 4-sector economy Intercept = Ao Slope=(b-bt-m) where b = MPC, t = tax rate, m = marginal propensity to import Figure 6.17 Page 239
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Slide 9 Models in this course
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Slide 10 Various multipliers Essentially the same format… Imports & taxes have negative signs Complex multiplier – page 241. MCQ possibility Back to …and cover essentially the same process: rounds of spending generate income but successive income flows curtailed by leakages into savings, taxes and imports… Multipliers triggered by… …consumption… …Investment… …government deficit spending… ..exports… 10 MCQs about AE model determinants & multiplier
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Slide 11 Models in this course 6 MCQs about money
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Slide 12 Money market equilibrium Money supply determined by RBA & banks and assumed constant Equilibrium interest rate where Md = Ms p 352 Money demand determined by interest rate and money GDP Pages 349-352 Single bank lends only excess reserves D= 1/rr x excess reserves = Ms for system – see Chap 10 ESAs and OMOs pages 396-404 to control bank reserves and hence Ms OMO buying increases bank reserves and hence Ms & interest rates… OMO selling decreases bank reserves and hence Ms & interest rates… Md
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Slide 13 Models in this course
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Figure 7.2 – page 263. Interest rate, real-
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Revision_2009 - Housekeeping Ken Revision lecture This...

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