Exam 2 Study Guide
Exam 2 Study Guide ECO 302-01
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This 4 page Study Guide was uploaded by Sarah Rahbek on Sunday March 27, 2016. The Study Guide belongs to ECO 302-01 at University of North Carolina - Greensboro taught by in Winter 2016. Since its upload, it has received 73 views. For similar materials see Intermediate Macroeconomic Theory in Economcs at University of North Carolina - Greensboro.
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Date Created: 03/27/16
Exam 2 Study Guide Memorize These 4 Graphs: Consumption Keynesian Cross (Real Economy) + Investment E Y=E (function of expectations Expectations and interest rates) + E=C+I( ,r)+G Government A Spending e(positive correlation) r (negative correlation) Y GDP Y1 Keynesian Money Market (Nominal Economy) r M S Supply of Money Interest Rates A 1 Demand for Money M (r,Y) M M 1 r ISLM LM (M ) Liquidity of Money A r1 Investment and Savings IS ( ,r,G,T) Y1 Y Aggregate Supply & Demand (MOST IMPORTANT) P AS (Labor Market & Production Function) A P1 S e AD (M , ,G,T) Y Y 1 FOR EXTRA POINT: Tie AS to Labor MKT and Production Function W Y N (W/P) A F (K,N) Y 1 A W 1 D N (W/P 1 N 1 N N N 1 Possible Exogenous Changes Policy (Most Likely): Fiscal (Change in G or T) Monetary (Change in M ) S Other: Change in e Change in AS (Change in F, K, N , Taxes (N )) D S Example: Contractionary Monetary Policy ( M ) AS AD ISLM r LM 2 P LM 1 AS 1 B A r2 P A 1 B r1 P 2 AD 2 AD 1 IS Y2 Y1 EYpectations 1 Money Mkt Y 2 Y1 Y Keynesian Cross r M 2 MS1 E Y=E E 1 A 2 B A B E (Lower Investment) r1 2 D M D1 M 2 M Y2 Y1 Y W Y S N 1 A F Y1 B Y A 2 W 1 B W 2 D N 1W/P 1) N 2W/P 2) N2N 1 N N 2 N1 N Effectiveness of Policies with different ISLM Slopes Monetary Policy Flat IS Curve: Effective Steep IS Curve: Ineffective Flat LM Curve: Ineffective Steep LM Curve: Effective Fiscal Policy Flat IS Curve: Ineffective Steep IS Curve: Effective Flat LM Curve: Effective Steep LM Curve: Ineffective Practice Multiplier Effect Y=1/(1-b) G Y=-b/(1/b) T Y= 1/(1-b) I Review Classical Material from Test 1
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