Money And Banking Test Islm Variables

Front 1

a

Back 1

autonomous spending

Front 2

b

Back 2

marginal propsesity to save

Front 3

c

Back 3

consumption

Front 4

d

Back 4

autonomous investment

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e

Back 5

tax base (non income taxes)

Front 6

f

Back 6

precautionary cash balances

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G

Back 7

govt expenditure

Front 8

-h

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dL/dR marginal propensity to economize in cash

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I

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investment

Front 10

K

Back 10

cambrige constant

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L

Back 11

liquidity Trap

Front 12

M

Back 12

money supply

Front 13

-n

Back 13

Marginal propensity to invest

Front 14

R

Back 14

interest rate

Front 15

S

Back 15

saving

Front 16

T

Back 16

taxes (income)

Front 17

t

Back 17

marginal tax rate

Front 18

V

Back 18

velocity

Front 19

Y

Back 19

GDP

Front 20

monetary polic is effective

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FLAT IS CURVE
STEEP LM CURVE

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fiscal policy is effective

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STEEP IS CURVE
FLAT LM CURVE

Front 22

Keyenes 3 reasons for keeping money balances

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Precautionary
Speculative
Transactions

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according to says law

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supply creates it own demand , (there is preciciely enough income w/ manufacturing to purchase everything produced)

the economy will never suffer from unemployment or under consumption

even though malthus was confused - classical economists explained that market forces of supply and demand would shift to always be gogin towards full employment.

Front 24

in classical interest rate theory, falling rates

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decrease the savings rate , increase investment spending

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according to classical economists rising aggregate demand

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rising aggregate demand leads to inflation

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in classical economics - the aggregate supply curve determines

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level of output

Front 27

in Keynesian model - a decrease in income leads to a decrease in

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consumption

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In they keynesian model , money demand is positively related

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to income

Front 29

Classical Theory of interest rates

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saving is a direct function of the interest rate. Investment is an indirect function of the interest rate.

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Cambridge Cash Balance Version of Quantity Theory

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M=kPy
M=money supply
k=cash balance
y=gdp

this expresses how as GDP rises , people have to keep a larger cash balance on hand to spend , this will require a bigger money supply to keep price level the same.

Front 31

what does the classicist model not include

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a money supply that can change - thus monetary policy is not in their model.

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the main DIFFERENCE between Keyenes and classicists

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Keynes did not think that fluctuating prices and interest rates would push the level of economic activity toward fully employment , especially in the short run.

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interest rates according to classics v keynesians

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k- i rates are from supply and demand of money
class- i rates are from savings and investment ( classicists say supply and demand for money determine the price level)

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Bonds - Coupon Rate

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Coupon Amount / Face value of the bond

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Bonds- Current Yield

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Coupon amount/ Current Price of the bond

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when a bond sells for over face value

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the actual yield of the bond (coupon rate) is obviously higher than the current yield - and a higher bond price reflects this

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Yield to maturity

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the rate of discount that makes the sum of present values for all future payments equal to the purchase price.

Front 38

standard deviation is a good way to measure

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risk of a financial asset in ones portfolio

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which type of bonds offer the lowest yield

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MUNICIPAL BONDS - these are even lower than t bonds bc of their tax exemption

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how to find the expected yield for a security

Back 40

simply the average yeild

Front 41

if velocity goes down, how does this effect K

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k will go up , since money is turning over slower then K (the cash balance) required is going to be higher.