# ECON 201 Study Guide - Final Guide: Real Interest Rate, Gdp Deflator, Loanable Funds

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11 Apr 2018

School

Department

Course

Professor

Employment

Natural rate (5%) = structural (min wag) - frictional (job search, AD shock)

Unemployment rate = # employed / labor force * 100

LF participation rate = (Labor force / adult pop.) * 100

Inflation:

GDP deflator = (Nominal GDP / Real GDP) * 100

-Nominal = curr price * curr quantity

-Real = base price * curr quantity

-CPI = ((cost of basket in curr. yr.) / (cost of basket in base yr.)) x 100

Real interest rate = Nom. interest rate - inflation rate

Closed economy:

Private spending= Y-T-C

Government Spending= T-G

Gov saving: T-Tr+G (if negative then deficit)

Present Value:

Present value = curr. value / (1+ interest rate)num yrs

LRAS, SRAS, AD

- AD: slopes down bc of wealth effect and interest rate effect

-SRAS: shifts because of input prices (wages, technology, expected change

in future price level, natural resource)

LRAS: economy at full employment, shifts bc of factors of production

Market for loanable funds

Insert graph

AE and GDP

Planned investment= actual investment - unplanned change in inventories (aka GDP- AE)

Y= 1 / (1-MPC)a or G or I or NX

Y = (-MPC) / (1-MPC)T

MPC: slope of consumption function

= Consumption / Disposable Income

Number of years to double = 70 / growth rate

Required Reserve Multiplier = 1 / rr

Consumption = a + MCP (Y-T)

Monetary and Fiscal Policy (shift AD)

Fiscal: gov spending and taxes

Monetary: money supply and interest rates

- MS r , I

- Recessionary gap: G, T, MS , r . shift AD right to fix

- Inflationary gap: G, T, MS , r shift AD left to fix

Debt vs. Deficit

Deficit: G-T-Tr this year

Debt: sum of all deficits

Okun's law: 1↓ in unemployment, 2 ↓ in GDP

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