Chapter 6 - The Goals of Macroeconomic Policy
... rate = 3% • If both expect inflation = 6%, nominal interest rate = 9% • If actual inflation is 2%, Nancy gains. Her real interest rate = 7% • If actual inflation is 8%, John gains. He only pays real interest rate = 1% ...
... rate = 3% • If both expect inflation = 6%, nominal interest rate = 9% • If actual inflation is 2%, Nancy gains. Her real interest rate = 7% • If actual inflation is 8%, John gains. He only pays real interest rate = 1% ...
Finding the Equilibrium Real Interest Rate in a Fog
... rate consistent with the economy achieving maximum employment and price stability over the medium term–is currently quite low by historical standards. Under assumptions that I consider more realistic under present circumstances, the same rules call for the federal funds rate to be close to zero… “Fo ...
... rate consistent with the economy achieving maximum employment and price stability over the medium term–is currently quite low by historical standards. Under assumptions that I consider more realistic under present circumstances, the same rules call for the federal funds rate to be close to zero… “Fo ...
Presentation to Seattle-Area Community Leaders Bellevue, WA
... with maximum employment and price stability, and we set that rate as our target. Over the past year, prices rose 1.8 percent, according to the Fed’s preferred measure of inflation. I expect inflation to come in below the 2 percent target both this year and in 2013. The main reason is a weak job mark ...
... with maximum employment and price stability, and we set that rate as our target. Over the past year, prices rose 1.8 percent, according to the Fed’s preferred measure of inflation. I expect inflation to come in below the 2 percent target both this year and in 2013. The main reason is a weak job mark ...
Word
... yt = inflation rate; Fed policy and, therefore, inflation rate dynamics may be different when recent inflation rates have been low vs. when they have been large. ...
... yt = inflation rate; Fed policy and, therefore, inflation rate dynamics may be different when recent inflation rates have been low vs. when they have been large. ...
Marginal cost - is the change in total cost that arises
... payment received and paid. This also includes workers’ remittances from abroad. - net transfers which usually takes into account foreign aid flows. Capital account: the difference between a country’s capital invested in other countries, and the capital invested by other countries in it. ...
... payment received and paid. This also includes workers’ remittances from abroad. - net transfers which usually takes into account foreign aid flows. Capital account: the difference between a country’s capital invested in other countries, and the capital invested by other countries in it. ...
Macro Glossary File
... inflation: - a persistent rise in the general level of prices. inflationary gap: - the difference between actual real GDP and potential real GDP when the economy is temporarily producing an output above full employment. injection: - any spending flow that is not dependent on the current level of in ...
... inflation: - a persistent rise in the general level of prices. inflationary gap: - the difference between actual real GDP and potential real GDP when the economy is temporarily producing an output above full employment. injection: - any spending flow that is not dependent on the current level of in ...
Synopsis_2014_v3 ed 7 and 8
... Ch 22-23 (ed 7) Futures and Forwards, Options Caps Floors and Collars Ch 22-23 (ed 8) Futures and Forwards, Options Caps Floors and Collars In these two chapters (which we cover briefly) we focus on some definitions of basic contracts. I have covered them briefly in the Power Point related the OBS r ...
... Ch 22-23 (ed 7) Futures and Forwards, Options Caps Floors and Collars Ch 22-23 (ed 8) Futures and Forwards, Options Caps Floors and Collars In these two chapters (which we cover briefly) we focus on some definitions of basic contracts. I have covered them briefly in the Power Point related the OBS r ...
Presentation to the Commonwealth Club of California San Francisco, CA
... overnight loans. We control this rate by pumping cash into the banking system or withdrawing it. This is a powerful tool because the interest banks pay to borrow determines what they charge for loans and ultimately works its way through to the rates businesses and households pay for credit. This Dec ...
... overnight loans. We control this rate by pumping cash into the banking system or withdrawing it. This is a powerful tool because the interest banks pay to borrow determines what they charge for loans and ultimately works its way through to the rates businesses and households pay for credit. This Dec ...
Document
... c. expansionary fiscal policy combined with restrictive monetary policy d. a reduction in investment tax credits e. a reduction in the income tax rate 28. In a normal IS-LM framework, if government purchases and taxes are both increased by the same amount, then a. income will increase by exactly tha ...
... c. expansionary fiscal policy combined with restrictive monetary policy d. a reduction in investment tax credits e. a reduction in the income tax rate 28. In a normal IS-LM framework, if government purchases and taxes are both increased by the same amount, then a. income will increase by exactly tha ...
Monetary Policy : Instruments and Types
... revival. Since business activity is almost at a stand still, businessmen do not have any inclination to borrow to build up inventories even when the rate of interest is very low. Rather, they want to reduce their inventories by repaying loans already drawn from the banks. Moreover, the question of b ...
... revival. Since business activity is almost at a stand still, businessmen do not have any inclination to borrow to build up inventories even when the rate of interest is very low. Rather, they want to reduce their inventories by repaying loans already drawn from the banks. Moreover, the question of b ...
Real GDP Accelerating
... Plow Horse pace. However, there are important signs of improvement. For example, it looks like “real” (inflationadjusted) personal spending rose at the fastest pace in a decade. And the key reason holding down overall growth in Q2 is an inventory correction that may end up overshooting, helping boos ...
... Plow Horse pace. However, there are important signs of improvement. For example, it looks like “real” (inflationadjusted) personal spending rose at the fastest pace in a decade. And the key reason holding down overall growth in Q2 is an inventory correction that may end up overshooting, helping boos ...
Business Cycles, Unemployment, and Inflation
... GDP • Can be negative or positive Loss of income is unequal ...
... GDP • Can be negative or positive Loss of income is unequal ...
Final Exam
... Based on your reading of Professor Pollin’s article (Real World Macro, article 7.2), discuss why John Maynard Keynes believed that free market capitalism was fundamentally unstable. In the post-WWII period, social democratic capitalism was implemented in many countries. However, by the 1970s, both K ...
... Based on your reading of Professor Pollin’s article (Real World Macro, article 7.2), discuss why John Maynard Keynes believed that free market capitalism was fundamentally unstable. In the post-WWII period, social democratic capitalism was implemented in many countries. However, by the 1970s, both K ...
Bond basics (free downloadable PowerPoint
... A bond works much the same way – you give a company $1,000 and they pay you a fixed rate of interest for a specified period of time, after which they return your principal. Governments (federal, provincial and municipal) and corporations use bonds to raise the capital they need to expand. ...
... A bond works much the same way – you give a company $1,000 and they pay you a fixed rate of interest for a specified period of time, after which they return your principal. Governments (federal, provincial and municipal) and corporations use bonds to raise the capital they need to expand. ...
Lecture 22
... – Recall that the SR-AS curve shifts when input prices change. – Turns out that input prices are affected by the price of imports. – Turns out that the price of imports increased considerably in the 1970s. – This led to large negative cost shocks to the SR-AS curve during the decade. ...
... – Recall that the SR-AS curve shifts when input prices change. – Turns out that input prices are affected by the price of imports. – Turns out that the price of imports increased considerably in the 1970s. – This led to large negative cost shocks to the SR-AS curve during the decade. ...
On the Government Spending Multiplier
... one increase in total output demand at a given interest rate, assuming that the increase in government spending has no implications for future government spending or output. The above is a partial equilibrium statement, as it holds the real interest rate fixed. In equilibrium, however, the real inte ...
... one increase in total output demand at a given interest rate, assuming that the increase in government spending has no implications for future government spending or output. The above is a partial equilibrium statement, as it holds the real interest rate fixed. In equilibrium, however, the real inte ...
Foreign Exchange
... • Exchange rates (e) are a function of the supply and demand for currency. • An increase in the supply of a currency will decrease the exchange rate of a currency • A decrease in supply of a currency will increase the exchange rate of a currency • An increase in demand for a currency will increase t ...
... • Exchange rates (e) are a function of the supply and demand for currency. • An increase in the supply of a currency will decrease the exchange rate of a currency • A decrease in supply of a currency will increase the exchange rate of a currency • An increase in demand for a currency will increase t ...
Document
... 10. Assume the economy is at full employment and the SBP restricts money supply. What will be the effects on the level of output and prices? a. in the medium run output and prices will both decrease, but in the long run output will remain the same, while prices will decrease b. output will not be af ...
... 10. Assume the economy is at full employment and the SBP restricts money supply. What will be the effects on the level of output and prices? a. in the medium run output and prices will both decrease, but in the long run output will remain the same, while prices will decrease b. output will not be af ...
The “Natural” Interest Rate and Secular Stagnation: Loanable Funds
... save less and firms seek to invest more. The supply of loanable funds will go down and demand up, until the two flows equalize with the interest rate at its “natural” level. In New Keynesian thinking, demand for investment can be so weak and the desire to save so strong that the natural rate lies be ...
... save less and firms seek to invest more. The supply of loanable funds will go down and demand up, until the two flows equalize with the interest rate at its “natural” level. In New Keynesian thinking, demand for investment can be so weak and the desire to save so strong that the natural rate lies be ...
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.