November 9 notes

November 9 notes - Nominal and Real Interest Rates...

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Nominal and Real Interest Rates N N e e Inflation Real Cost Premium of Funds ominal Interest Rate Real Interest Rate Expected Inflation : : Basic Relationship Definitions iN i U S US ± ± ²
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e : Interest Rate Observed in Financial markets : Interest Rate relevant for Investment Decisions Assume is constant Changes i Real Interest Rate ( ) Nominal Interest Rate (i) S U ± ± ± ± n imply changes in i
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AD-AS Analysis 0 Relax Assumptions: Upward Sloping AS Curve ( , ) Re-introduce Government Activity dis A CC Y P ± ± ± <
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N 0 Monetary Fiscal Policy Policy Instruments Instrument Open Market Operations by the Fed Amended Aggregate Demand Curve (, , , , , , ,, ) New Feature: d YD P C I A G T X T R t O M O ± ± ±²²³ ²²´ <
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Open Market Purchase by the Fed Effects on Aggregate Demand & , & Shifts to the Right Open Market Purchase by Fed: FF Y d Ri DD M i iI IE AD ±n p n p ±p ±n ± ± n
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Open Market Sale by the Fed Effects on Aggregate Demand & , & Shifts to the Left Open Market Sale by Fed: FF d Ri DD M i iI IE Y AD ±p n p n ±n ± p ± p ±
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Open Market Operations: Effects on AD
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This note was uploaded on 01/20/2012 for the course ECON 180.101 taught by Professor Maccini during the Fall '08 term at Johns Hopkins.

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November 9 notes - Nominal and Real Interest Rates...

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