ECON 1115 Lecture Notes - Lecture 11: Nominal Rigidity, Delivery (Commerce), Reflation
Document Summary
Gdp is determined by spending (which causes the swing) Productivity curve, short-term debt cycle, long-term debt cycle. Central government, central bank (interest rates, printing money): two biggest spenders. Credit: lenders and borrowers create credit, once credit is created it turns into debt, asset and liability disappears once borrower pays money and interest. Productivity (measure of efficiency): output gdp/worker hours (currently about. Short term deb cycle: 1st phase is expansion. Higher spending/quantity= price goes up and inflation, central bank highers interest rates, less people borrow and this is opposite for deflation. Debt rises higher than income: long-term debt cycle. Cut spending, debts are reduced, wealth is redistributed, central bank prints new money: steps of deleveraging. Depression: when people realize what they thought was theirs isn"t really, when people cant pay loans back, others rush to the bank to take out their money fearing it will be lost. Debt cutting is not helpful because it causes deflation.
