AgecNotesmodule2-1.pdf AGEC 21700 - 001
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This 2 page Class Notes was uploaded by Victoria E on Sunday September 27, 2015. The Class Notes belongs to AGEC 21700 - 001 at Purdue University taught by Lawrence P Deboer in Fall 2015. Since its upload, it has received 62 views. For similar materials see Economics in Agricultural & Resource Econ at Purdue University.
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Date Created: 09/27/15
Agec Notes 92215 Module 21 The Macro Model 0 A goods market and a money market and how they interact with one another Measurement 0 Real GDP growth CPI in ation rates all items amp core 0 In ation other than oil has been quite stable 0 Unemployment rate 0 Corporate BAAAAA interest rate spread highest spread takes place when its not con dent at all Most severe since 1930 Demandsupply axes pricey axis quantity real GDP x axis 0 Supply is aggregate supply curve demand is aggregate demand curve Aggregate demand Spending by households for consumption Spending by businesses for investment Spending by governments for gov purchases Spending by the world for exports Spending by Americans for imports The point of the economy is to produce the stuff that we need formula for aggregate demand ClGXM A decline in agg demand decline in spending 0 AD spending Aggregate Supply 0 Production 0 Production by businesses 0 Which buy inputs 0 Use technology 0 Under natural conditions 0 To produce output on which consumers other businesses government and the world want to spend AS production Business investment depends on the real interest rate 0 Housing developments office buildings shopping malls factories equipment inventories 0 Suppose a business can borrow money to make an investment at an interest rate of 10 What of the initial investment will you receive 12 or 15 o If the rate of return is higher than the investment rate 0 Low interest rate more investment projects 0 If expected return goes done and real interest rate goes up Money Market 0 Financial markets are the lending and borrowing 0 Interest rate spread in 2009 went up Second shifts Money market to goods market When changes in the money market change the real interest rate agg demand shifts in the goods market
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