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Econ Cha 9.docx

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Department
Economics
Course
Economics 2152A/B
Professor
Jennifer Mc Donald
Semester
Winter

Description
TFP is the IMP Page 37: Interest rate increase, move along the curve. Not cost min. Page 38: 2 different r rate Page 39: The bigger the default premium, the bigger the gap between borrower and bank. Bank loaned different people wiz different loan rate. The one they don’t want is a bad customer. Default premium is the potential risk rate. Page 40: So the firms investment schedule curve shifts, when increase in X, Page 41: Adding the Gov’t r go up, C go down, Sub is bigger. Page 43: Output supply? --- when r changes. Page 45: K is fixed. Use the same N for above and below. Plug into Y, than find Y. Page 46: An increase in the real interest rate will shift the labour supply curve to the right, while a decrease will shift it left. If the interest rate increases, the wage rate will fall, employment will rise and output will rise. Page 47: Once we know N, we know Y1, No price shift in all chapters 9. When r increases, not shift ND, change the P (y). Level employment increases. Higher r, higher Y. there is no demand for customer. This all is assume r increases or decreases. R goes up, so people want to save more, people work more, so N increases. Page 49: 1) A change in labour supply other than for a change in interest rates. 2) A change in labour demand, (firm want more) 3) A change in the production function Page 50: A decrease in lifetime wealth causes the labour supply curve to shift right (negative income effect on leisure). A increase in gov’t spending, financed by an increase in taxes (necessary for gov’t’s budget constrain to hold) lowers life time wealth. Page 51: Changing in lifetime wealth, no change in the production function. Changing in r, moving along the curve. Page 52: Wages fall, employment increases The output supply curve shifts right and production increases. Page 53: Changes in z or K, there is a shift in production curve. Page 54: As the result: The wage rate increases Employment increases Production increases And the output supply curve shift to the right Output is higher because z and K are higher, also because employment is higher. Page 55 Employment goes up, u have the shifter, move along is the employment increase, and productive goes up, so Y goes up, this is double increases effect. The figure: B-A-C Page 56 C and Investment are negatively related to the real r. all we care about here is sup effect. Higher r, current C is more expensive, future C is cheaper. Page 57 The figure: the demand for current goods. C+I+G Page 58: • When the interest rate increases, both consumption demand and investment demand decrease. • A higher interest rate shifts down the demand for goods. • Equilibrium quantity of goods demanded falls. • Therefore, the output demand curve is downward sloping. • When the interest rate increases, both consumption demand and investment demand decrease. • A higher interest rate shifts down the demand for goods. • Equilibrium quantity of goods demanded falls. • Therefore, the output demand curve is downward sloping. Page 59: 45 degree line. Looking at Total Spending = Total sale Page 60: 1: shift in the demand for consumption goods A) An increase
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