1 / 4

Mr. Mayer AP Macroeconomics

Mr. Mayer AP Macroeconomics. Macroeconomic Relationships a cheat sheet (Note: .: = therefore). Key to Macroeconomic Symbols. MS – Money Supply MD – Money Demand ER – Excess Reserves i% - nominal interest rate DR – discount rate RR – reserve ratio

tilden
Download Presentation

Mr. Mayer AP Macroeconomics

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Mr. MayerAP Macroeconomics Macroeconomic Relationships a cheat sheet (Note: .: = therefore)

  2. Key to Macroeconomic Symbols • MS – Money Supply • MD – Money Demand • ER – Excess Reserves • i% - nominal interest rate • DR – discount rate • RR – reserve ratio • OMO – open market operations (buying and selling gov’t bonds) • FOREX – foreign exchange market • D$ - demand for dollars in FOREX • S$ - supply of dollars in FOREX • $ - value of dollar in FOREX • ↑ - increase • ↓ - decrease • → - shift right (increase) • ← - shift left (decrease) • .: - therefore • Δ - change • GDPR – Real GDP (Output) • C – Consumption • IG – Gross Private Investment • G – Government Spending • XN – Net Exports (Exports – Imports) • w- wages (primary cost of production) • T – taxes • DI – disposable income • X – Exports • M – Imports • AD – aggregate demand • SRAS – short-run aggregate supply • LRAS – long-run aggregate supply • PL – Price Level • SRPC – short-run Phillips curve • LRPC – long-run Phillips curve • u% - unemployment rate • π% - inflation rate • SLF – Supply of loanable funds • DLF – Demand for loanable funds • r% - real interest rate

  3. Self-correcting economy: below full-employment (recession) • Assume recessionary gap with flexible wages (w) u% ↑.: w↓ .: SRAS→.: GDPR↑ & PL↓.: u%↓ & π%↓ = SRPC← • Self-correcting economy: above full-employment (inflation) • Assume inflationary gap with flexible wages (w) u%↓.: w↑ .: SRAS←.: GDPR↓ & PL ↑.: u%↑ & π%↑ = SRPC→ • Expansionary fiscal policy on economy below full-employment (recession) • Assume recessionary gap with sticky wages (note: DI = disposable income) T↓.: DI↑.: C↑.: AD→.: GDPR↑ & PL↑.: u%↓ & π%↑ = move up/left along SRPC OR G↑.: AD→.: GDPR↑ & PL↑.: u%↓ & π%↑ = move up/left along SRPC • Contractionary fiscal policy on economy above full-employment (inflation) • Assume inflationary gap T↑ .: DI↓.: C↓ .: AD← .: GDPR↓ & PL↓ .: u%↑ & π%↓ = move down\right along SRPC OR G↓ .: AD← .: GDPR↓ & PL↓ .: u%↑ & π%↓ = move down\right along SRPC • Expansionary monetary policy on economy below full-employment (recession) • Assume recessionary gap with sticky wages Fed buys bonds, DR↓, and/or RR↓ .: ER↑ .: MS→ .: i%↓ .: IG↑ .: AD→.: GDPR↑ & PL↑.: u%↓ & π%↑ = move up/left along SRPC • Contractionary monetary policy on economy above full-employment (inflation) • Assume inflationary gap Fed sells bonds, DR↑, and/or RR↑ .: ER↓ .: MS ← .: i%↑ .: IG ↓ .: AD← .: GDPR↓ & PL↓ .: u%↑ & π%↓ = move down\right along SRPC

  4. ‘Crowding Out’ of Gross Private Investment (effect of deficit spending) • Assume Expansionary Fiscal Policy (G↑ and/or T↓ .: government budget moves toward deficit) deficit spending .: DLF → or SLF ← .: r%↑ .: IG ↓ (partially or completely offsets intended increase in AD) • ‘Crowding In’ of Gross Private Investment (effect of budget surplus) • Assume Contractionary Fiscal Policy (G↓ and/or T ↑ .: government budget moves toward surplus) budget surplus .: DLF ←or SLF→ .: r% ↓ .: IG↑ (partially or completely offsets intended decrease in AD) • Expansionary Fiscal Policy Net Export Effect (counters policy) • Assume Expansionary Fiscal Policy (G↑ and/or T↓ .: government budget moves toward deficit) deficit spending .: DLF → or SLF ← .: r%↑ .: D$→ .: $↑ .: U.S. goods/services relatively expensive and foreign goods/services are relatively cheap .: X↓ and/or M↑ .: XN ↓ • Contractionary Fiscal Policy Net Export Effect (counters policy) • Assume Contractionary Fiscal Policy (G↓ and/or T ↑ .: government budget moves toward surplus) budget surplus .: DLF ←or SLF→ .: r% ↓ .: S$ → .: $↓ .: U.S. goods/services relatively cheap and foreign goods/services are relatively expensive .: X↑ and/or M↓ .: XN↑ • Expansionary Monetary Policy Net Export Effect (reinforces policy) • Fed buys bonds, DR↓, and/or RR↓ .: ER↑ .: MS → .: i%↓ .: S$ → .: $↓ .: U.S. goods/services relatively cheap and foreign goods/services are relatively expensive .: X↑ and/or M↓ .: XN↑ • Contractionary Monetary Policy Net Export Effect (reinforces policy) • Fed sells bonds, DR↑, and/or RR↑ .: ER↓ .: MS↓ .: i%↑ .: D$→ .: $↑ .: U.S. goods/services relatively expensive and foreign goods/services are relatively cheap .: X↓ and/or M↑ .: XN ↓

More Related