Aided financial system bank bailouts So great depression didnt occur again When

# Aided financial system bank bailouts so great

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Aided financial system (bank bailouts) So great depression didn’t occur again. When banks go down so does the economy. Together all of that stuff ^^ have kept US from entering the depression again Ending part B- calculating and understanding real GDP Puzzle: In 2001 recession, GDP rose by \$190 trillion. How can this be? Should GDP fall in a recession? Question- Which do you think rose? Nominal or real GDP Nominal rose because P*Q, the quantity produced barley fell at .5% and prices rose 2%, so the increase of prices counteracted the loss of jobs etc. in recession Real GDP fell by \$40 billion Nominal GDP rose by \$190 billion Part C: Monetary & Fiscal Policy Money is an asset that does each of the following Medium of exchange A store of value Piggy bank, stock A unit of account How we price things, in another country it will be in euro or what not but always priced in terms of money Standard of deferred payment Loan, promise to pay them back and do so in the terms of dollars US - M1 (M for money) ≈ cash + checkable deposits (checking accounts- checks or debit card now)(\$3.3trillion) M2=M1 + savings accts. In bank (\$13.3 trillion) Broader category than M1, because you can’t make purchases through your savings account like you would checking. In short, it’s a close substitute to the medium of exchange. Questions Every time a dollar is used to make a purchase in a country, this will show up in a GDP? No .. purchase of illegal goods, intermediate goods etc. How many of the following are considered money in the US? Corporate stock
US savings bond Capital owned by boeing Investment by ford in a factory Funds in a checking account US currency (cash) In this problem he was asking what is money, not what is does.. In the money equation above it says M as in money equals cash and checkable deposits as in check accounts or debit cards Monetary policy changes in M1 and M2 Interest rates Rate at which we borrow and lend at Ex) Student loans (Stafford) 2017 interest rates- 3.76% “10 year treasury Note” + 1.81% 2007 interest rates- 7.00% Average debt of a penn state graduate: \$37,000 Monthly repayment over 10 years @3.76: \$370 a month in payments @7: \$430 (\$7200 more in total) Where do interest rates come from? Supply and demand from lenders and borrowers Monetary policy is apart of this Monetary policy Conducted by the fed aka central bank of US, the federal reserve In charge of currency Established by congress and most key positions appointed by the president and confirmed by the Senate Yet the fed is largely independent of the federal government by law because the terms. Congress tells the fed what they should focus on… “Dual Mandate” “Promote effectively the goals of maximum employment, stable prices* and moderate long-term interest rates” Stable prices would be 2% inflation per year Monetary policy is changes in interest rate & M1 & M2 to achieve these goals Fed head chair: Janet Yellen Also heads the “Federal Open Market Committee” (FOMC) Decide what the fed can do to reach goals