Econ152 Ch. 13

Front 1

When MD increases:

Back 1

-people sell bonds
-The price of a bond falls
-interest rate rises

Front 2

Increase in MS:

Back 2

-people buy bonds
-The price of a bond rises
-interest rate falls

Front 3

Increase in Credit Card use –

Back 3

decrease in MD

Front 4

Spread of use of ATMs-

Back 4

Increase in MD

Front 5

Fed decreases quantity of $ Short run-

Back 5

-quantity of $ demanded decreases
-real and nominal interest rates rise

Front 6

Fed decreases Quantity of $ Long Run-

Back 6

-MD decreases
-price level falls
-real interest rate returns to normal level

Front 7

Fed conducts open market purchase of securities short run-

Back 7

nominal interest rate falls,

Front 8

Fed conducts open market purchase of securities long run-

Back 8

nominal interest rate returns to initial level

Front 9

Fed conducts open market sale of securities short run-

Back 9

nominal interest rate rises

Front 10

Fed conducts open market sale of securities long run-

Back 10

nominal interest rate returns to initial level

Front 11

-Inflation Rate =

Back 11

Money growth + Velocity growth – Real GDP growth

(nominal interest rate – real interest rate)

Front 12

Nominal Interest Rate =

Back 12

Real Interest Rate + Inflation Rate

Front 13

Velocity of Circulation (V) =

Back 13

Nominal GDP (P x Y) / Quantity of Money (M)

Front 14

M =

Back 14

(P x Y) / V

Front 15

Nominal GDP =

Back 15

Real GDP (Y) x Price level (P)

Front 16

P =

Back 16

M x V / Y

Front 17

Real GDP =

Back 17

Money growth + Velocity Growth – Inflation rate

Front 18

Real Interest Rate =

Back 18

Nominal Interest Rate – Inflation Rate

Front 19

Velocity growth =

Back 19

Inflation rate + Real GDP growth –Money Growth

Front 20

Money growth =

Back 20

Inflation rate + Real GDP growth – Velocity growth

Front 21

Nominal GDP growth =

Back 21

growth rate of real GDP + Inflation rate

Front 22

Velocity of circulation decreases when –

Back 22

growth rate of quantity of money is greater than growth rate of RGDP

Front 23

Short run –

Back 23

nominal interest rate adjusts to achieve money market equilibrium

Front 24

Long Run-

Back 24

price level adjusts to achieve money market equilibrium

Front 25

Quantity Theory of Money-

Back 25

When real GDP equals potential GDP, an increase in the quantity of money brings an equal percentage increase in the price level.

Front 26

MV=

Back 26

PY

Front 27

% M + % V =

Back 27

% P +% Y

Front 28

AS

Back 28

relationship between price levels and desired output by businesses
(pos. relationship)

Front 29

potential GDP =

Back 29

GDP at full employment

Front 30

Change in AS

Back 30

-Cost up, AS down
-Labor Supply
-Capital
-Human Capital
-Technology

Front 31

AD=

Back 31

C + I + G + NX

(- relationship)

Front 32

NX=

Back 32

exports - imports

Front 33

Infaltion rises

Back 33

AD rises

Front 34

Interest down

Back 34

AD up

Front 35

Govt. Spending up

Back 35

AD up

Front 36

Taxes down

Back 36

AD up

Front 37

1970's

Back 37

recession

Front 38

Inflationary Gap

Back 38

how much real GDP increased from potential GDP

Front 39

Recessionary Gap

Back 39

how much real GDP is less than pot. GDP

Front 40

Recession

Back 40

Decrease in real GDP lasting more than 2 quarters or 6 months

Front 41

2001 Recession

Back 41

Mar- Nov.
-economy expanded
-when ended unemployment went up

Front 42

Recressions since WWII

Back 42

mild and less frequent