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by: Hope Johnson

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# The Fed - Loans ECON 201 Macro Economics

Hope Johnson

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These notes cover government financing, interest rates, and private saving.
COURSE
Macroeconomics
PROF.
Dr. Greer
TYPE
Class Notes
PAGES
3
WORDS
CONCEPTS
Macroeconomics, federal debt, The, Fed, Loans
KARMA
25 ?

## Popular in Economics

This 3 page Class Notes was uploaded by Hope Johnson on Thursday September 22, 2016. The Class Notes belongs to ECON 201 Macro Economics at 1 MDSS-SGSLM-Langley AFB Advanced Education in General Dentistry 12 Months taught by Dr. Greer in Fall 2016. Since its upload, it has received 5 views. For similar materials see Macroeconomics in Economics at 1 MDSS-SGSLM-Langley AFB Advanced Education in General Dentistry 12 Months.

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Date Created: 09/22/16
Loans Wednesday, September 21, 2016 2:04 PM Role of the fed in the Long Run The lower the dollar, the higher the price State of inflation is always a monetary phenomenon. The fed can stimulate the economy in the short run, but hurt it in the long run. In a closed economy: Y= C+I+G C = C ( Y-T ) - mathematical function of disposal income T = Taxes - trans MPC Marginal Prop. To consume I = I (cr) R = real interest rate Real interest rate = nominal interest rate- inflation rate R = I - pi When you take student loans, you want hyper inflation so its essentially cheaper to pay off your loans Market for loanable funds : Saving = Investment Y = C + I + G S= I = Y - C - G S = (Y-T-C) + (T - G) S = private - public savings In the market of loanable funds the interest rate is going to be _________. (amount S = (Y-T-C) + (T - G) S = private - public savings In the market of loanable funds the interest rate is going to be _________. (amount loaned?) Public saving falls, bc gov deficit Interest rates rise, saving and inv. Falls. To finance deficit, the gov. issues bonds. In closed economy, savings equals investment. Come up with what happens…. To the r, s, and I … S and I the same And you move the right, s and I increase As you move to the left, Saving and I decrease Don’t get confused between the effect on saving and the …movement? Of investment Increase in Gov't budget Deficit If the gov. runs a larger deficit, it affects…. (I-G) --> Saving decreases- -> S curve shifts -->Public Savings falls - Interest rates must rise to get bonds issued - It becomes more costly for a firm to get a loan, because it is more expensive If the gov. runs a larger deficit, it affects…. (I-G) --> Saving decreases- -> S curve shifts -->Public Savings falls - Interest rates must rise to get bonds issued - It becomes more costly for a firm to get a loan, because it is more expensive - Cost of acquiring capital on project becomes too high Longer term interest rate- good proxy for growth. Interest rates are determined in the long run by long term savers - Increases in investment spending, policies that affect. --> Investment tax credits (QLF: Quantity of loans funded

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