Introduction to PE

Introduction to PE - Introduction to PE I. II. III. IV. The...

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Introduction to PE I. The Government and The Economy a. Normally during a bad economy the party in power is voted against in the next election II. Inflation is Best; Deflation is Worse a. Inflation is good within certain limits but bad when it gets to high b. Deflation is always bad c. They both just refer to change in price over change in time d. Inflation Bad d.i. At a certain level it is not bad and a normal economy inflation rises d.ii. If prices are growing rapidly means the dollars being earned are worth less, but if borrowing money to invest need to figure if the dollar will be worth more or not which causes uncertainty e. Deflation is MUCH worse e.i. Comes because of a collapse in demand…this is occruing in the housing market in florida e.ii. Lot of people selling and nobody buying then price must go down, but usually you can get some type of equilibrium e.iii. However, the expectations of buyers changes such as if the prices of houses keep falling nobody really wants to buy because of the possibility of getting a better deal e.iv. We are all being rational but is sucking demand out of the economy III. The Importance of Credit a. Borrowing and lending b. Allows the maximize utilization of resources c. If you can persuade someone to allow you to buy something such as machines allows for the ability to give out more jobs and create goods d. Credit stimulated economic growth, but to much credit can cause to much inflation e. Once you borrow money and are in payback mode, you are consuming less because you need to make the payoffs f. In this country we have an accumulation of private debt and government debt g. Debt is not terrible IV. Managing Aggregate Demand a.i. Goal overall is for the government to make sure things do not get to hot or to attempt to fix an economic slow down or fix a deflation a.ii. What most countries do is they try to do this buy managing aggregate demand…they do not go to individual consumers but they try do it fomr
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This note was uploaded on 11/29/2011 for the course INR 2001 taught by Professor Richard during the Fall '08 term at University of Florida.

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Introduction to PE - Introduction to PE I. II. III. IV. The...

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