MGEA06H3 Study Guide - Midterm Guide: Deflation, Human Capital, Permanent Income Hypothesis

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MGEA06H3 Full Course Notes
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MGEA06H3 Full Course Notes
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Midterm prep review (including important formulas) Mgea06h3: fiscal policy: government changes either its spending pattern or its tax policy to pursue economic goals, e. g. Taking money out of circulation puts downward pressure on the aggregate price level. More people being willing to work but fewer firms being willing to hire. Surplus of workers at higher wage. Harmful to workers who no longer are able to find work once the wage increases. Unemployment increases as the wage increases: the natural rate of unemployment equals the addition of frictional unemployment and structural unemployment. Company cars and computers: technology is a catch- all for other sources of growth. Increased interest rate, private consumption falls as individuals choose to save rather than spend. Affects individuals" decisions to borrow and invest. As the interest rate increases = a corresponding decrease in the quantity of loanable funds demanded. Reduction in the supply of loanable funds.

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