Final Exam Review

Final Exam Review

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Unformatted text preview: labor force) x 100 What does AD curve represent? Demand of economy as a whole including consumer consumption, business investment, government spending, net exports, represents GDP What does SAS curve represent? Changes and effects that will happen in the short run based on input prices and the invisible hand and does not focus on long term effects, productivity and wages What does LAS curve represent? Focuses on supply and is similar to manipulating PPC curve and is perfectly inelastic What causes movement in AD curve? Monetary and fiscal policies, changes in factors of GDP What causes movements in SAS curve? Changes in price levels What causes movement in LAS curve? Changes in resources What government intervention can be used to return the economy to equilibrium? Decrease taxes What are autonomous expenditures? Aggregate expenditures What are induced expenditures? Income – autonomous expenditures What is marginal propensity to expend? (Income – autonomous expenditures) / income What is the multiplier? 1/ ( 1 – marginal propensity to expend) Test 2 What is included in M1? Checking, traveler’s checks, cash What is M2? All of M1 and savings accounts, time deposits, money market mutual funds, CDs When does M1 change? Transactions When does M2 change? When Fed puts in or takes out money What happens when someone puts transfers from saving account to cash? M1 goes up, no change in M2 Are M1 and M2 individual? No What changes when it is outside of home country? Change in M2, so change in M1 What happens if it is spent in another country? They will decrease What are the three methods of monetary policy used by the Fed? Reserve requirements, open operations market, discount rate What are reserve requirements? Used within banks and it is how banks create money What is open operations market? Buying and selling’s bonds and the use of the inverse relationship between bonds and interest rates What is discount rate? Used by Fed for other banks and uses the amount of money that is borrowed in calculation for the discount rate and Fed is lender of last resort What is the monetary base? Money supply / multiplier What is the multiplier? 1/r or (1+c)/(c+r) How do you find the new multiplier? New amount wanted / monetary base What do you do with the new multiplier? 1 / new multiplier How do you find how many bonds are needed to buy/sell? Decrease/increase money supply / multiplier How do you find the discount rate? Increase/decrease by / multiplier = x x / discount bo...
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This note was uploaded on 10/02/2013 for the course ECON 104L taught by Professor Dellasue during the Spring '12 term at Marist.

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