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30 Cards in this Set
- Front
- Back
- 3rd side (hint)
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Gdp growth equation |
(Yt - Y(t-1))÷ Yt-1 |
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GDP deflate equation |
...... |
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Closed economy production equation + in equallibrium |
Z = Co+C1(Y-T) + I + G Y = ( 1/1-C1 ) ((Co +I +G + C1T )) |
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Labour Market Definitions- -Non-institutional civilian -Civilian labour force -Participation rate -Unemployment rate |
-Non-institutional civilian the number of people potentially available for civilian employment. -Civilian labour force sum of those either working or looking for work. -Participation rate is the ratio of the labor force to the noninstitutional civilian population. -Unemployment rate the ratio of the unemployed to the labor force. |
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Labour Market Definitions -Active labour market -Sclerotic labour market -Efficiency Wages |
-Active labour market Many separartions, many hires -Sclerotic labour market Few separations, few hires, stagnet unemployment pool -Efficiency Wages Theories that link the productivity or efficiency of workers to the wage they are paid (Depends on market conditions + nature of job) |
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Aggregate Demand equation
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Y = Y { M/P , G , T }
+ + - |
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Aggregate Supply Equation |
P = Pe (1+m) F( 1- Yn/L , Z) |
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Natural level of output (Yn) equation |
Yn: 1/1+m = F ( 1- Yn / L , Z ) |
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LM equation |
M/P = Y . L (i) |
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Changes in expected Price level, have what effect how? |
lead 1 for 1 to change in price level 1) as wages setters expect higher P, they raise nominal wages 2) higher wages lead to high production cost, therefore firms will raise prices ^Pe ---> ^W -----> ^P |
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What affect does and INCREASE in money supply have - in the short run? - in the medium run? |
short run: ^Ms = decrease i decrease i = ^ C and ^ I =^ Y Long run: ^Ms = ^ P.... M neutrality |
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Uncoverd Interest parity |
difference in interest rates between two countries is equal to the expected change in exchange rates between the countries' currencies |
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Capital account = Current account = |
Capital account = change in total domestic assets held by foreign investors – change in total foreign assets held by domestic investors Current account = Trade in goods/services + Net investment income + Net transfers |
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T/F or U: Countries with Current acc deficits Must have Net Capital Outflows |
U -> Current account deficit associates with net capital inflows Broadly speaking: Current account + Capital account + Statistical errors= 0 A negative current account results in a positive capital account if there is no statistical errors etc... -However... Capital Flight... Therefore: The impact of current account deficit on net capital is uncertain |
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T/F or U If the yen is expected to depreciate against the euro, assuming no risk then the uncovered interest parity implies that the Japanese interest rate will be lower than the euro interest rate |
F |
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Closed Economy multiplier (lump sum tax) Open economy multiplier (lump sum tax) Closed indirect tax regime Open indirect tax regime |
Closed: 1/1- mpc Open 1 / 1 - mpc + mp to import Closed: 1 / 1 -mpc * (1-t) Open: 1/ 1 - mpc * (1-t) + mp to import |
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T/F or U A fiscal expansion tends to decrease net exports |
True ^ output leads to ^ imports, while exports will stay the same :. net export decrease |
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T/F or U Fiscal expansion has a positive effect on output in an open economy with flexible exchange rates, but negative effect on output in an economy with fixed exchange rates |
False. Under fixed exchange rates regime, the fiscal expansion has even larger positive effect on output explanation in hint |
Fiscal expansion shifts IS right - to keep i constant,(and :. E constant) govt needs to shift LM right. this will mean expansion has an evan larger affect on Y |
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T/F or U Under fixed exchange rates, the money stock must be constant |
fALSE False. (nominal) money stock must vary to achieve fixed exchange rates (because of price shock |
A supply shock will ^ Prices, leading to ms to move left (^i) - CB will try to keep i constant (:. e constant) by increasing nominal money stock (shifting ms back right) |
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Factors required to be good candidate for a common currency |
-High labour mobility (prerequisite) - countries should experience similar shocks - Countries should share similar labour structure |
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real exchange rate formula |
q = E p/p* |
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uppose a country switches from a fixed to a flexible exchange rate. Which of the following will occur as a result of this change? •A) monetary policy will become a less effective tool for changing output. •B) a given change in government spending will now have a greater effect on output. •C) both fiscal and monetary policy will become more effective in changing GDP. •D) both fiscal and monetary policy will become completely ineffective in changing GDP. |
Answer: E Switching from a fixed to a flexible exchange regime gives freedom to monetary policy - A given change in government spending will now have LESS effect on output - Fiscal policy is less effective in changing GDP but still remains effective |
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What affect will aa revaluation cause(in short run) in the AS/AD model? |
A revaluation (or equivalently a currency appreciation) will dampen net exports -AD shifts left -P and Y will decrease |
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assume that the there exists uncertainty about the impact of monetary policy on the macroeconomy. Given this information, it would be most appropriate for the central bank to increase money growth..... |
By less than the increase that will yeild the desired response |
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T/F or U The debt-to-GDP ratio will tend to increase over time when real interest rate is less than real output growth. |
False. if r is less than real y growth, the dept-to-GDP ratio will tend to Decrease |
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What affect does hyperinflation have on real money balances |
leads to a decrease |
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Reducing the loan-to-value will have what likely affect |
Decrease demand, thus slow down the increase in housing price |
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The existence of inflation will have what affect on he GOVT's BENIFIT from SEIGNORAGE |
Increase the govt's benifit from seignorage |
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A reduction in Inflation will do what to the Opportunity cost of holding money? |
Decrease in the opportunity cost |
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Following Taylor rule.... If actual inflation is less than target, and actual U rate is greater than the natural unemployment rate. what should we expect? |
Actual inflation and Actual U > than natural U then CB should implement monetary expansion |
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