ECON 104 Lecture Notes - Lecture 8: Overnight Rate, Money Supply, Business Cycle

• School: Simon Fraser University
• Department: Economics
• Course: ECON 104
• Professor: Vasyl Golovetskyy

Document Summary

Now: shocks supply sides: discovery of oil, invenion of pc: demand side: us cut taxes. Expansion: we can have too much economic acivity (overheated economy) Work too much inlaion bad for growth. Expansion and recession short run: stabilizaion policies. Crowding-out efects: gdp =c+i(decrease)+g(increase)+nx: change gdp/change g= muliplier greater than 0 (empirical) Forward looking consumers or businesses: smooth of the consumpion. Eicially: recession=decreasing gdp for 2 consecuive quarters. Budget has to be voted on parliament. Recession ->ur increase -> ei payment increase -> gdp: no decision, counter cyclical policy. Bank of canada banker"s bank: policy makers. Many interest rates in the economy: risk: terms. Bank of canada sets overnight rate 8 imes a year at fads. Bank of canada controls interest rate of economy. Gdp = c(i) + i(i) + g(i) + nx(i) If interest rate decrease, then the above c+i+g+nx all increases.