Changes in savings rate, population growth rate, or rate of depreciation does not affect long- term growth rate of Y/L • T is also called Multi-Factor Productivity; growing T allows Net I to continue growing and productivity to continue growing • K/L can rise due to increase in T, increase in the savings rate, fall in depreciation rate • The Structural (Standardized) Deficit: happens when a country posts a deficit even when the economy is operating at its full potential. A deficit will be posted no matter how the economy is functioning. • Monetary Base: Currency in Circulation + Total Bank Reserves o Total Bank Reserves = $1,747.97 Put on notecard • M1: Currency + Total Checkable Deposit + Travelers Checks (does not include savings deposits, small time deposits) • With excess reserves: fewer loans, change in M1 will end up being smaller after an open market operation • If the Standardized Deficit is larger than the actual government budget deficit, the GDP must be above potential GDP • Change in loans at end of open market purchase will equal change in reserves/(rrr), then this answer (which is the change in deposits) x 1-rrr.
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