ECON 105 Study Guide - Midterm Guide: Money Multiplier, Money Creation, Nominal Interest Rate

• School: Simon Fraser University
• Department: Economics
• Course: ECON 105
• Professor: Junjie Liu

Document Summary

Saving, investment, and financial institutions( chapter 8: understand financial markets vs. financial investment, sp, sg, s and i. Note: t= net taxes= taxes- transfer payment: marktet for loanable funds. Supply of loanable funds comes from saving. Demand for loanable funds comes from investment. How the government policies affect the loanable funds market. Labour force participation rate: problems with unemployment rate as a measure of joblessness, actual unemployment= natural unemployment + cyclical unemployment. Natural unemployment= frictional unemployment+ structural unemployment: four theories for the natural rate of employment. Money and inflation ( chapter 10+ 11: function of money, measure of money stock. Quantity of money = currency + deposits: money creation process. Money multiplier= total deposits/ reserve= 1/ reserve ratio. Reserve ratio = reverse/ deposits: monetary policy. Changing bank rate: money equilibrium in the long run. The graph: understand quantity theory of money, classical dichotomy and monetary neutrality, quantity equation mv=py, costs of inflations. Shoe leather costs ( only understanding )