New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

ECO 2013 notes week of 3/13-3/19

by: Jessica Ralph

ECO 2013 notes week of 3/13-3/19 ECO 2013

Marketplace > Florida State University > Economcs > ECO 2013 > ECO 2013 notes week of 3 13 3 19
Jessica Ralph
GPA 3.4
View Full Document for 0 Karma

View Full Document


Unlock These Notes for FREE

Enter your email below and we will instantly email you these Notes for Macroeconomics

(Limited time offer)

Unlock Notes

Already have a StudySoup account? Login here

Unlock FREE Class Notes

Enter your email below to receive Macroeconomics notes

Everyone needs better class notes. Enter your email and we will send you notes for this class for free.

Unlock FREE notes

About this Document

These notes cover what Joab talked about during class on tuesday 3/15, and thursday 3/17. Being the week after spring break and st. paddys day, I figured some of y'all may have missed class.
Joab Corey
Class Notes
Macro Economics




Popular in Macroeconomics

Popular in Economcs

This 6 page Class Notes was uploaded by Jessica Ralph on Friday March 18, 2016. The Class Notes belongs to ECO 2013 at Florida State University taught by Joab Corey in Spring 2016. Since its upload, it has received 80 views. For similar materials see Macroeconomics in Economcs at Florida State University.

Similar to ECO 2013 at FSU


Reviews for ECO 2013 notes week of 3/13-3/19


Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 03/18/16
3/15/15 Loanable funds market  Market that coordinates the borrowing and lending decisions of business firms and households o Price of loanable funds is the real interest rate “r”  “Real interest rate” means adjusted for inflation o Quantity of loanable funds is the amount saved or invested “Qs,I” o Similar to goods/services graph  Demand for loanable funds 1. Firms demand loanable funds (investment) 2. Downward sloping because as the interest rate decreases the firm will want to borrow more money o Increase in investment: demand cur Supply of loanable funds Individuals supply loanable funds (through savings) o Savings: after-tax income not spent on consumption  Incometaxesdisposable income consumption OR savings Upward sloping because as the interest rate increases people will want to save more o Increase in savings: supply curve will shift right o Decrease in savings: supply curve will shift left The interest rate  Nominal interest rate: the percentage of the amount borrowed that must be paid to the lender in addition to the repayment of the principle  Real interest rate: the interest rate adjusted for inflation (real cost of borrowing and lending money) o r = i – pi Interest rate and inflation  When the actual rate of inflation is greater than anticipated: borrowers gain, lenders lose  When the actual rate of inflation is less than anticipated” lenders gain, borrowers lose  Inflation does not help borrowers or lenders in a s systematic manner The interest rate and bond prices  Interest rate and bond prices are inversely rated  When the interest rate rises (falls), the market value of previously issued bonds will fall (rise) The foreign exchange market  Market in which the currencies of different countries are bought and sold o Price is price of foreign currency o Quantity is amount of foreign currency Changes in exchange rate  Appreciation: increase in value of currency relative to foreign currencies o Ex: dollar can buy more euros  Depreciation: reduction in value of currency relative to foreign currencies o Ex: dollar can buy less euros Demand for foreign currency  Demand for foreign currency is : imports + capital outflows o Capital outflows: domestic money invested abroad  Downward sloping because as dollar appreciates (foreign currency depreciates), people can import more and invest more in other countries Supple of foreign currency  Exports + capital inflows o Capital inflow: foreign money invested domestically  Upward sloping because as the dollar depreciates (foreign currency appreciates) foreign countries will demand more domestic exports and will invest more domestically o Demand increases: quantity increases, price of foreign currency increases o Demand decrease: quantity decreases, price of foreign currency decreases o Supply increases: quantity increases, price of foreign currency decreases o Supply decreases: quantity decreases, price of foreign currency increases 3/17/16 The foreign exchange market in equilibrium  Equilibrium occurs when supply of foreign currency equals demand for foreign currency o Imports + capital output = exports + capital input  Trade deficit: imports>exports o Capital output – capital input = exports – imports  Ex: 3 – 4 = 2 - 3  Trade surplus: exports> imports o Capital output – capital input = exports – imports  Ex: 5-4 = 6-5gn Aggregate goods/services market  A market that includes all final goods and services (counts all items that enter into GDP) o Example: we would not be looking at the supply and demand of pizza or haircuts or highways etc. it would be the supply and demand of pizza and haircuts and highways etc. o Price of all things (and on graphs): the price index (PI) o Quantity of all things (and on graphs): the real GDP (Y) o Includes 2 supply curves The aggregate demand curve Aggregate demand (AD) curve: the relationship between the price level and the quantity of domestically produced goods and services all households, business firms, governments and foreigners are willing to purchase o Downward sloping because as price level goes down, quantity demanded of all goods will increase 3 reasons why a decrease in price level will increase the quantity demanded of all goods 1. Increase the purchasing power of money  Graph: as PI decreases, Y will increase and shift to the right 2. Lead to a lower real interest rate, which increases consumption and investment  Graph: supply curve will shift to the right when you have more money in savings and the real interest rate will decrease. When real interest rate goes down, you will be less eager to put money in banks, thus you will start saving less and spend more.  r decreases  c increases, c increases  I increases  PI decreases  save more  r decreases  c increases, I increases  Y increase o WHEN PI DECREASES, Y INCREASES 3. Make domestically produced goods less expensive relative to foreign goods  Exports increase – imports The aggregate supple curve Relationship between a nations price level and the quantity of goods supplied by its producers o 2 relationships 1. Short-run aggregate supply curve 2. Long- run aggregate supply curve  Short run is time period in which something cannot be fixed, long run everything can be changed The short-run aggregate supply curve  Short-run aggregates supply curve (SRAS): upwards sloping because an increase in the price level will improve the profitability of the firms and cause them to increase output o Profit = revenue – cost o Ex: PI=1  revenue ($1x100) - cost ($100)= $0 o PI=2 revenue ($2x100) – cost ($100)= $100  Many of producers costa are still fixed The long-run aggregate supply curve  Long-run aggregate supply curve (LRAS): vertical because in the long-run people have had the time to adjust and so a higher price level will increase costs as much as it increases revenues o Profit = revenue – cost BUT ALL THINGS ARE UP FOR CHANGE o Ex: PI=1 revenue ($1x100)- cost ($100)= $0 o PI=2 revenue ($2x100)-cost ($200)=$0 o VERTICAL LINE ON GRAPH AT Y  Firms have no incentive to change production at any price level because in the long-run everything will balance out and profits wont change  Indicates potential output (Yf) of the economy  Where SRAS intersects LRAS: actual price level = expected price level Short-run equilibrium Occurs at the intersection of the AD and the SRAS o AD downward sloping, SRAS upward sloping o Intersection= e Long-run equilibrium  Occurs where AD, SRAS and LRAS all intersect at a single point o AD downward sloping, SRAS upward sloping, LRAS vertical line through intersection of AD and SRAS at point e o LRAS indicates wherever Yf is o Intersection is Y*  Yf = Y*  not in a recession, not in an expansion  Occurs when 1. We correctly anticipate price level 2. No expansion or recession (Y = Yf) 3. actual rate of unemployment = natural rate of unemployment ( U = U*)  If Yf is further left than Y*  expansion  If Yf is further right than Y* contraction ***think of the AD and SRAS as changing in the same way as all other graphs and ignore LRAS because all it is showing is the potential output, it is not actually there. Like yellow first-down line when watching football on tv, it is just there to help the viewer***


Buy Material

Are you sure you want to buy this material for

0 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Jim McGreen Ohio University

"Knowing I can count on the Elite Notetaker in my class allows me to focus on what the professor is saying instead of just scribbling notes the whole time and falling behind."

Janice Dongeun University of Washington

"I used the money I made selling my notes & study guides to pay for spring break in Olympia, Washington...which was Sweet!"

Bentley McCaw University of Florida

"I was shooting for a perfect 4.0 GPA this semester. Having StudySoup as a study aid was critical to helping me achieve my goal...and I nailed it!"


"Their 'Elite Notetakers' are making over $1,200/month in sales by creating high quality content that helps their classmates in a time of need."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.