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EC 111 chapter 13,15 lecture notes

by: Conner Jones

EC 111 chapter 13,15 lecture notes EC 111

Marketplace > University of Alabama - Tuscaloosa > Economcs > EC 111 > EC 111 chapter 13 15 lecture notes
Conner Jones
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Zirlott chapter 13 and 15 lecture notes for EC 111
Principles of Macroeconomics
Class Notes
EC 111 zirlott lecture notes
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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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