File
... • When unemployment is low, firms compete for workers and bid up wages sharply. • When unemployment is high, it is more difficult for firms to cut wages because workers tend to resist wage cuts. Result: Even if the total unemployment rate in the country appears to be at the natural rate of unemploym ...
... • When unemployment is low, firms compete for workers and bid up wages sharply. • When unemployment is high, it is more difficult for firms to cut wages because workers tend to resist wage cuts. Result: Even if the total unemployment rate in the country appears to be at the natural rate of unemploym ...
Chapter 7 - CSUN.edu
... The longer the maturity of a bond, the more of an effect a change in interest rates will have on it. The reason for this is that the price change is compounded into the bond price for more periods. Therefore, you can rule out statements b and e. A bond that pays coupons will be less affected by inte ...
... The longer the maturity of a bond, the more of an effect a change in interest rates will have on it. The reason for this is that the price change is compounded into the bond price for more periods. Therefore, you can rule out statements b and e. A bond that pays coupons will be less affected by inte ...
Incomplete Exchange Rate Pass-Through and Simple - S
... the degree of interest rate persistence. The policy maker sets the interest rate as a linear function of the lagged interest rate and the deviations of CPI inflation and output (and possibly the exchange rate) from their zero targets.9 Equation (7a), setting ρ = 0, is the simple rule suggested by Ta ...
... the degree of interest rate persistence. The policy maker sets the interest rate as a linear function of the lagged interest rate and the deviations of CPI inflation and output (and possibly the exchange rate) from their zero targets.9 Equation (7a), setting ρ = 0, is the simple rule suggested by Ta ...
Ch 3
... of labor equals the real wage. The same logic applies to the firm’s decision regarding how much capital to hire: the firm will hire capital until the marginal product of capital equals the real rental price. 3. A production function has constant returns to scale if an equal percentage increase in al ...
... of labor equals the real wage. The same logic applies to the firm’s decision regarding how much capital to hire: the firm will hire capital until the marginal product of capital equals the real rental price. 3. A production function has constant returns to scale if an equal percentage increase in al ...
Answers to questions.
... 3. The adage “inflation hurts lenders and helps borrowers” only applies if inflation is not expected. For example, interest rates normally increase in response to anticipated inflation. As a result, the lenders receive higher interest payments, part of which is compensation for the decrease in the v ...
... 3. The adage “inflation hurts lenders and helps borrowers” only applies if inflation is not expected. For example, interest rates normally increase in response to anticipated inflation. As a result, the lenders receive higher interest payments, part of which is compensation for the decrease in the v ...
Short–Run Effects of Fiscal Policy with Forward–Looking Financial
... of consumption is done by households who follow the “rule of thumb” of setting consumption equal to income. Some of our simulations raise the effective rule–of–thumb share to 50 percent, making the model’s consumption dynamics similar to those of the Campbell–Mankiw model. Household outlays for cons ...
... of consumption is done by households who follow the “rule of thumb” of setting consumption equal to income. Some of our simulations raise the effective rule–of–thumb share to 50 percent, making the model’s consumption dynamics similar to those of the Campbell–Mankiw model. Household outlays for cons ...
capr 1+) New Ke,Jne5Ian conomIcs: SticL,9 PrIces
... the New Keynesian model, just as we evaluated flexible-price-and-wage business cycle models in Chapter 13. We will see how well the New Keynesian model fits the key business cycle facts we discussed in Chapter 3, and we will examine how useful it is for guiding the formulation of economic policy In ...
... the New Keynesian model, just as we evaluated flexible-price-and-wage business cycle models in Chapter 13. We will see how well the New Keynesian model fits the key business cycle facts we discussed in Chapter 3, and we will examine how useful it is for guiding the formulation of economic policy In ...
IS-LM
... the only “perfectly liquid” asset. 2. The central bank was thought to have greater control over its supply. ...
... the only “perfectly liquid” asset. 2. The central bank was thought to have greater control over its supply. ...
Financing Growth in the WAEMU Through the Regional
... issued about 27 percent of the T-bills. A large part of those T-bills was of less than ½ year maturities, with a predominance of three- and six-month maturities. Financial institutions from Côte d’Ivoire, Senegal, Burkina Faso, and Mali bought 75 percent of the securities, though the distribution of ...
... issued about 27 percent of the T-bills. A large part of those T-bills was of less than ½ year maturities, with a predominance of three- and six-month maturities. Financial institutions from Côte d’Ivoire, Senegal, Burkina Faso, and Mali bought 75 percent of the securities, though the distribution of ...
Fiscal Policy in the Short Run
... The AS–AD equilibrium in Fig. 29.1(a), the money market equilibrium in Fig. 29.1(b), and interest-sensitive expenditure in Fig. 29.1(c) are consistent with each other and are the only equilibrium. If AD were less than in Fig. 29.1(a), real GDP would be less, the demand for money would be less, the i ...
... The AS–AD equilibrium in Fig. 29.1(a), the money market equilibrium in Fig. 29.1(b), and interest-sensitive expenditure in Fig. 29.1(c) are consistent with each other and are the only equilibrium. If AD were less than in Fig. 29.1(a), real GDP would be less, the demand for money would be less, the i ...
Bond Valuation_Ch11
... than corporate bonds due to tax-exempt feature • Treasury bonds have lower rates than corporate bonds due to no default risk • The lower the credit rating (and higher the risk), the higher the interest rate • Discount (low-coupon) bonds yield less than premium (high-coupon) bonds ...
... than corporate bonds due to tax-exempt feature • Treasury bonds have lower rates than corporate bonds due to no default risk • The lower the credit rating (and higher the risk), the higher the interest rate • Discount (low-coupon) bonds yield less than premium (high-coupon) bonds ...
When is the Government Spending Multiplier Large?
... number of periods. Once again, we nd that the government spending multiplier is larger when the zero bound is binding. Allowing for capital accumulation has two e!ects. First, for a given size shock it reduces the likelihood that the zero bound becomes binding. Second, when the zero bound binds, t ...
... number of periods. Once again, we nd that the government spending multiplier is larger when the zero bound is binding. Allowing for capital accumulation has two e!ects. First, for a given size shock it reduces the likelihood that the zero bound becomes binding. Second, when the zero bound binds, t ...
Currency Shake-up ´97 : A Case Study of the Czech Economy
... The last decade of the departing 20th century will enter the history of the world economy as a period of increased instability of financial markets, a widespread incidence of monetary crises even collapses of national economies. Observers or analysts may find fascinating the truly global nature of t ...
... The last decade of the departing 20th century will enter the history of the world economy as a period of increased instability of financial markets, a widespread incidence of monetary crises even collapses of national economies. Observers or analysts may find fascinating the truly global nature of t ...
Estimation of the Equilibrium Real Exchange Rate in Russia: Trade
... For an economy like Russia’s, whose exports are dominated by primary resources, which on world markets are perfect substitutes for the same commodities produced by other countries, the concept of external competitiveness appears to be quite irrelevant. Moreover, in the case of Russia and for the pur ...
... For an economy like Russia’s, whose exports are dominated by primary resources, which on world markets are perfect substitutes for the same commodities produced by other countries, the concept of external competitiveness appears to be quite irrelevant. Moreover, in the case of Russia and for the pur ...
HustedMelvin_c21
... Assumes price level is fixed in short run but flexible in the long run Allows for pricing to market behavior in which firms practice price discrimination across countries ...
... Assumes price level is fixed in short run but flexible in the long run Allows for pricing to market behavior in which firms practice price discrimination across countries ...
Exchange rate and determinants of balance of trade, its impact on
... has more merits and it would be a reflective of business confidence on the dynamic economic performance. The State Bank in its annual report for the year 2007-08 said that in Pakistan, the correlation of GDP growth was highest with capital goods manufacturing compared with the production of intermed ...
... has more merits and it would be a reflective of business confidence on the dynamic economic performance. The State Bank in its annual report for the year 2007-08 said that in Pakistan, the correlation of GDP growth was highest with capital goods manufacturing compared with the production of intermed ...
Ch 7
... – Due to seasonal fluctuations in demand or changing weather conditions that affect agriculture, construction, tourism industries and so on ...
... – Due to seasonal fluctuations in demand or changing weather conditions that affect agriculture, construction, tourism industries and so on ...
5. F M F
... In the third quarter of 2014, global liquidity conditions deteriorated slightly, while the uncertainty over global monetary policies continued. In this period, while the Fed ended its asset purchases, it also announced that accommodative policies would be maintained for a while, which caused expecte ...
... In the third quarter of 2014, global liquidity conditions deteriorated slightly, while the uncertainty over global monetary policies continued. In this period, while the Fed ended its asset purchases, it also announced that accommodative policies would be maintained for a while, which caused expecte ...
Interest rate
An interest rate is the rate at which interest is paid by borrowers (debtors) for the use of money that they borrow from lenders (creditors). Specifically, the interest rate is a percentage of principal paid a certain number of times per period for all periods during the total term of the loan or credit. Interest rates are normally expressed as a percentage of the principal for a period of one year, sometimes they are expressed for different periods such as a month or a day. Different interest rates exist parallelly for the same or comparable time periods, depending on the default probability of the borrower, the residual term, the payback currency, and many more determinants of a loan or credit. For example, a company borrows capital from a bank to buy new assets for its business, and in return the lender receives rights on the new assets as collateral and interest at a predetermined interest rate for deferring the use of funds and instead lending it to the borrower.Interest-rate targets are a vital tool of monetary policy and are taken into account when dealing with variables like investment, inflation, and unemployment. The central banks of countries generally tend to reduce interest rates when they wish to increase investment and consumption in the country's economy. However, a low interest rate as a macro-economic policy can be risky and may lead to the creation of an economic bubble, in which large amounts of investments are poured into the real-estate market and stock market. In developed economies, interest-rate adjustments are thus made to keep inflation within a target range for the health of economic activities or cap the interest rate concurrently with economic growth to safeguard economic momentum.