Weekly Notes for Week of January 25 - January 29
Weekly Notes for Week of January 25 - January 29 ECON 104
Popular in Introductory Macroeconomic Analysis and Policy, Goffe
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This 4 page Class Notes was uploaded by Ethan Ezratty on Tuesday February 2, 2016. The Class Notes belongs to ECON 104 at Pennsylvania State University taught by Goffe in Winter2015. Since its upload, it has received 75 views.
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Date Created: 02/02/16
2/3/16 12:58 AM Monetary Policy -conducted by the U.S. Federal reserve (“Fed”), the U.S. central bank -established by Congress + most key positions appointed by the senate. - yet the Fed is LARGELY IND of Fed Gov. -Fed “dual mandate” from congress: “promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates” - Fed Chair: Janet Yellen - also heads the “ Federal Open Market Committee” ( FOMC) - key fed tool- Fed funds interest rates * what banks charge each other for overnight loans -EX: how the Fed affects us the FOMC (part of Fed)federal funds rate goes 3%-4% -> higher costs for banks -> loan rates for consumers & firms go up -> more expensive for firms and consumers to buy goods with credit - > slower growth (i.e. % change real GDP) -few jobs created, harder time finding job, fewer new firms Clicker question: The unemployment rate suddenly rises. What do you think the Fed would do with the federal funds rate? -increase it -lower it -keep the same -not sure Question: If the federal funds rate falls, all else equal. GDP will likely rise and 2 components of the GDP will change. GDP = C+1+G+NX Fiscal Policy -Change in federal expenditures & taxes -these 2 are changed independently -controlled by the President and Congress -Government budget deficit= federal expenditures- federal taxes - The difference is borrowed by the U.S. Treasury per year by selling U.S. Treasury bonds to the investigating public A type of “Security” -Federal debt: total mount of bonds sold by the Federal Government. (accumulated deficits): $13.1 tril or 74% of GDP -interest payments: $223 bil. (1.3% of GDP) -Fed sets the federal funds rate to achieve its dual mandate - monetary policy -Federal Government (President & Congress) set federal expenditures & taxes (fiscal policy) borrowing (deficit) pays for any expenditure -Question: Is the fed responsible for the federal debt? No 2/3/16 12:58 AM 2/3/16 12:58 AM
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