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by: Kelsey Fagan

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# EC202 Week 5 Notes EC 202

Marketplace > University of Oregon > Economcs > EC 202 > EC202 Week 5 Notes
Kelsey Fagan
UO
GPA 3.58

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Here are the notes from Monday's review section in class. These are the only notes for the week since there is a midterm on Wednesday (4/27).
COURSE
Intro Econ Analy Macro
PROF.
TYPE
Class Notes
PAGES
4
WORDS
KARMA
25 ?

## Popular in Economcs

This 4 page Class Notes was uploaded by Kelsey Fagan on Monday April 25, 2016. The Class Notes belongs to EC 202 at University of Oregon taught by Chad Fulton in Spring 2016. Since its upload, it has received 11 views. For similar materials see Intro Econ Analy Macro in Economcs at University of Oregon.

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Date Created: 04/25/16
Day 9 (4/25):  Midterm Review  What to expect:  ● 5­10 True or False Questions  ● 25­30 multiple choice questions  ● 2­3 open­ended questions (calculation/short answer/graphing)  What to bring:  ● Scantron  ● Pencil  ● Simple or scientific calculator (no graphing calculators!)     1. Measurement Concepts:  a. Levels vs. Rates  i. A number (level) vs. a percentage (rate)  1. If I say that GDP is \$3 trillion, that is leve of GDP  2. If I say that inflation is 3%, that is rate of inflation  b. Growth Rates: the percentage change in a variable   Growth rate = (value this period ­ value last period)/ value last period *100%  ● Think (new­old)/old *100%  ● Types of growth rates:  ○ Inflation  ○ GDP growth  ○ Population growth  ○ The interest rate (growth of the value of an asset)  c. Real vs. Nominal  i. Nominal ​ value of a variable if the value in terms of current dollars  ii. Real​ value of a variable is the value in terms purchasing power  1. Nominal variable in levels  Real variable= nominal variable*(CPI base year/CPI current year)  2. Nominal variable as a rate  Real variable=nominal variable­inflation  2. Markets:  a. A market is any arrangement that describes the forces determining how much of a  good is supplied​ and how much is ​demanded​  by way of price.  b. Equilibrium:  i. A point in the market where things are “settled”  1. The quantity suppliers want to sell is equal to the quantity  demanders want to purchase  ii. The ​price and quantity​ we would tend to observe if we examined the  market is determined to be equilibrium  iii. Equilibrium is established through ​price adjustments  1. If we have a ​shortage​ (so quantity demanded > quantity supplied),  prices tend to rise to bring us back to equilibrium  2. If we have a ​surplus​ (so quantity demanded < quantity supplied),  prices tend to fall to bring us back to equilibrium  c. Price:  i. In a market setting, theprice​ regulates the quantities demanded and  supplied.  ii. To demanders, the price represents an ​opportunity cost​ : in order to  receive more of a good, they must give up something  iii. To suppliers, the price usually represents revenue  iv. IMPORTANT​ : the price does not have to be in dollars  d. EXAMPLE:  i. The market for cars in Eugene, OR  1. The good being traded: cars  2. The price of a car: dollars  3. Supply: car dealerships and individuals selling their cars create  supply  4. Demand: individuals wanting to purchase new or used cars create  demand  3. Movements along/shifts  a. Movement along the demand or supply curve  i. Caused by a change in the price  b. A shift of the demand or supply curve  i. Caused by a change in something else that affects the agents demanding or  supplying the good  c. NOTE: we typically don’t believe that prices move “for some reason”. Price  changes are ​market outcomes​  driven by surpluses or shortages of the good which  puts pressure on price  d. EXAMPLE:  i. Suppose that LAne Transit District closes so that there are no more buses  in Eugene  ii. The will make it more important for individuals to have cars to get to  work, shopping, etc.  iii. At any price​ , individuals will want to purchase more cars   iv. This is graphically represented by a shift (right) in the demand curve  v. As a result of this shift in the demand curve, there will be a shortage of  cars available ​at the current price  vi. The shortage will put pressure on prices to rise  vii. As a result of the rising prices, the quantity supplied​  will increase  viii. The end result will be a ​new equilibrium​  with more cars sold and higher  prices  e. Shifts in curves:  i. Demand can increase (shift right)  ii. Demand can decrease (shift left)  iii. Supply can increase (shift right)  iv. Supply can decrease (shift left)  4. Macro­markets:  a. Labor market  i. Good: labor amount  ii. Price: real wage rate  iii. Demand: firms demand labor so they can produce goods  1. Things that influence the demand for labor:  a. Price: as real wage rises, firms will demand less and  vice­versa  b. Labor productivity: the more productive workers are, the  more firms will want to hire them  iv. Supply: individuals supply labor so they can receive income  1. Things that influence the supply of labor:  a. Price: as the real wages rise, individuals will supply more  and vice­versa  b. Population/employment­to­population ratio: the people  there are working, the more labor will be supplied  b. Loanable funds market  i. Good: funds that can be borrowed  ii. Price: real interest rate  iii. Demand: firms demand loanable funds so they can invest  1. Things that influence the demand:  a. Price: as the real interest rate rises firms will demand less  and vice versa  b. Expected profit: the more profit the firm expects to make,  the more likely they will invest  iv. Supply: individuals supply loanable funds so they can receive interest  payments  1. The other option for individuals is to hold money  2. Things that influence the supply:  a. Price: as the real interest rate rises, individuals will supply  more loanable funds and vice­versa  b. Disposable income: if your income rises, you will tend to  save some of the additional income  c. Expected future income: is you expect to make more in the  future, you will tend to save less now  d. Wealth: if your wealth increases, you will tend to save less  now  e. Default risk: if it is less likely that your loan will be paid  back (default risk rises), you will tend to loan out fewer  funds   c. Money market  i. Good: money  ii. Price: nominal interest rate  iii. Demand: individuals demand money so they can make purchases  1. Things that influence demand:  a. Price: as the nominal interest rate rises, individuals will  demand less money and vice­versa  b. The general price level: the higher prices are the more  money you must hold in order to make purchases  c. Real GDP: increases in GDP correspond to increases in  income. The more income you make, the more you will  want to purchase, and so the more money you must hold in  order to make those purchases  d. Financial innovation: the easier it is to get money for  making purchases ​ when you want to​ , the less money you  will hold  iv. Supply: money is supplied by the Federal Reserve Board  1. Things that influence supply:  a. Price: the supply of money changes in the nominal interest  rate have no effect on the supply of money  Day 10 (4/27):  Midterm   Reminder that there isn’t any homework due and there are no lab sections!

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