MACRO NOTES - WEEK OF 2/23/16
MACRO NOTES - WEEK OF 2/23/16 13022
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This 1 page Class Notes was uploaded by Dwayne Young on Sunday February 28, 2016. The Class Notes belongs to 13022 at Georgia State University taught by Brian Hunt in Spring 2016. Since its upload, it has received 32 views. For similar materials see Principles of Macroeconomics in Economcs at Georgia State University.
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Date Created: 02/28/16
MACROECONOMICS 2/24/16 • In a simplified economy GDP = C + I + G SPRIVATE= GDP + TR – T – C SGOVERNEMNT= T – TR – G NS = SPRIVATE + SGOVERNMENT= (GDP + TR – T – C) + (T – TR – G) = GDP – C – G Hence, I = NS • Investment spending = National savings in a closed economy C= C a (mpc)(Y-T) • 0 < mpc < 1 • 1 – mpc = mps • mps > .75 Loanable funds market = market where people go to save money and a market where people go to borrow money. APR – Annual percent rate At Equilibrium, supply will equal demand and savings will equal investment. ______________________________________________________________________________ 2 FACTORS OF DEMAND OF SHIFT IN LOANABLE FUNDS • If a firm believes, its sale will increase in the future, it invests more today to build for future sales. IF it believes future sales will fall, then it will invest less today. Investor confidence: is a measure of what firms expect for future economic activity. If confidence is high, they are more likely to borrow for investment at any interest rate. - 3 factors that can shift the supply of funds curve • Time preference; people prefer to receive goods and services sooner rather than later. Weaker time preference has more patience, this can be a measure of a person’s time preference. • Consumption smoothing; Based on early, mid, and late life. When you are trying to smooth out your consumption over your general lifetime. • Income wealth As interest rates go up, people start saving more money. Because they will receive a higher return for saving their money.
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