EC 111 chapter 13,15 lecture notes
EC 111 chapter 13,15 lecture notes EC 111
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This 3 page Class Notes was uploaded by Conner Jones on Wednesday March 2, 2016. The Class Notes belongs to EC 111 at University of Alabama - Tuscaloosa taught by Zirlott in Spring 2015. Since its upload, it has received 50 views. For similar materials see Principles of Macroeconomics in Economcs at University of Alabama - Tuscaloosa.
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Date Created: 03/02/16
Chapter 13 and 15 for EC 111 Chapter 13 financial institutions financial system- group of institutions that helps match saving of one person with investment of another financial markets- institutions through which savers can DIRECTLY provide funds to borrowers o bond market – certificate of indebtedness o stock market – claim to partial ownership of a firm financial intermediaries- institutions through which savers can INDIRECTLY provide funds to borrowers o banks o mutual funds – institutions that sell shares to public and use proceeds to buy portfolios of stocks/bonds kinds of savings o private savings = income – tax – consumption (Y – T – C) (income not used for consumption or taxes) o public savings = tax revenue – government spending (T – G) o national savings = private savings + public savings (portion of national income not used for consumption or government purchases) o investment (in closed economy) (Y – C – G) = national savings budget surplus – an excess of tax revenue over government spending o taxes – gov’t spending o public savings budget deficit – shortfall of tax revenue from government spending o gov’t spending – taxes o – (public savings) investment – the purchase of new capital o examples: equipment for new business, build a new house, build a new factory market for loanable funds o a supply-demand model for the financial system o assumptions: only one financial market all savers deposit savings in this market all borrowers take out loans from this market there is one interest rate (both return to savings and cost of borrowing) o supply of loanable funds come from savings o demand of loanable funds come from investments Chapter 15 Bureau of Labor Statistics (BLS) – measures unemployment in US labor force – the total number of workers including employed and unemployed in the market does not include: o discouraged workers o workers paid “under the table” types of unemployment o Natural rate of unemployment – normal rate of unemployment around which actual unemployment rate fluctuates o Cyclical unemployment Deviation of unemployment from its natural rate Associated with business cycles o Frictional unemployment When workers spend time searching for the jobs that best suit their skills and tastes Short term for most workers Economy is always changing so some frictional unemployment is always going to occur Occurs when wages are above equilibrium o Structural unemployment Occurs when there are fewer jobs than workers Usually long term Job search – the process of matching workers with their appropriate jobs Ways gov’t can speed up job search o Government employment agencies: provide info about job vacancies to speed up the matching of workers to jobs o Public training programs: equips workers displaced from work with skills needed in growing industries Unemployment insurance: a “safety net” that provides income to the unemployed o Increasing UI will raise frictional unemployment Minimum wage laws o Increasing MW would increase structural unemployment Union – a worker association that bargains collectively with employers over wages, benefits, and working conditions o Exert their market power to negotiate higher wages for workers o When they bargain successfully, wages and unemployment rise in that industry Efficiency wages: firms voluntarily pay above equilibrium wages to boost worker productivity o Worker health – paying higher wages allows workers to eat better, makes them healthier o Worker turnover – paying high wages gives workers more incentive to stay, reduces turnover o Worker quality – higher wages attracts better job applicants, increases quality of firm’s workforce Worker effort – workers can work hard or shirk. Shirkers are fired if caught.
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