MGEA05H3 Chapter Notes - Chapter 25: Nominal Interest Rate, Potential Output, Output Gap

66 views4 pages
kkweiss24 and 39095 others unlocked
MGEA05H3 Full Course Notes
9
MGEA05H3 Full Course Notes
Verified Note
9 documents

Document Summary

Higher inflation pushes up nominal interest rates, and lower inflation pushes them down. Inflation erodes the real value of money, and a higher interest rate is required to cover the effects of inflation and deliver a positive return to the lender. The bank of canada"s aim was to reduce the rate of inflation and interest rates: the banks policy was to push up interest rates. Short-run effects: interest rate private consump and investment real gdp recession. Long-run effects: excess supply factor prices price level inflation nominal interest rate. Short-run effect of saving: saving expenditure real gdp recession. Long-run effect of saving: recession excess supply factor prices price level saving financial capital nominal interest rate investment potential output growth. Short-run: emphasize changes in outputs as deviations from potential output, limited price and wage adjustment. Long-run: emphasize changes in output as changes of potential output, considerable wage and price adjustment takes place.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related Documents

Related Questions