Lecture Notes Week of 9/29- Ag Econ
Lecture Notes Week of 9/29- Ag Econ AGEC21700
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This 3 page Class Notes was uploaded by Abby Shepherd on Monday October 12, 2015. The Class Notes belongs to AGEC21700 at Purdue University taught by DeBoer in Summer 2015. Since its upload, it has received 25 views. For similar materials see Economics in Economcs at Purdue University.
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Date Created: 10/12/15
Ag Econ Lecture Notes Week of 929 Debates about Money analyzing the gold standard Bimetallism and the federal reserve 0 Slow money growth holds down the aggregate demand potential output grows 0 Gold window closed when there is literally no more gold left 0 They wanted back on the gold standard to be in good standing with Great Britain 0 The price level doubled in about 4 years then price index kept de aUng a When the price level got back to 100 after the war they brought back the gold standard 0 Then the de ation continued Political issues of 188039s and 189039s a The western farmer wants to borrow money with interest from the eastern banker The prices keep going down but the contract with the bank is xed Gold stock rises slowly relative to production of goods and services quottoo little money chasing too many goods causes de ationquot The purchasing power of the 80 is much greater so the farmers are losing money and the banker is gaining money Country split between lenders and borrowers o Lenders want nothing to change 0 Borrowers want to get rid of the gold standard Bimetallism use gold and silver to back up the money supply 0 Paying cash for gold AND silver 0 When adding silver to the money supply aggregate demand goes up which creates price stability William Jennings Bryan 18601925 Presidential Candidate of democrats in 1896 1900 1908 quotthe great commonerquot quotboy orator of the Plattequot Famous for being a great speaker Supporter of bimetallism and the middle class businessmen 0 He wanted to adopt bimetallism which will force Great Britain to adopt it instead of being forced to stay on the gold standard because Great Britain is 0 Gold in ation started in 1896 The Money Market 0 Money supply in uenced by banking 0 Fractional reserve banking o The public deposits money gt Some of the deposits are stored in a vault or withdrawn gt Most of the money is put into loans The money multiplier formula Money multiplier 1 rr quotrrquot is the reserve ratio monetary base x money multiplier money supply a when lenders get pessimistic reserve more money multiplier decreases money supply decreases What was the debate about money from 19091913 0 Expansion in 190106 0 Financial panic of 190708 which lead to recession 0 Recovery in 1909 which tells the public that there was not a real problem in 07 and 08 0 Congress and president teddy Roosevelt set up a national monetary commission to study the problem What was the federal reserve Lender of last resort 0 Prevent nancial panic o Lend to banks in trouble at the quotdiscount ratequot 0 Provide quotelasticquot currency 0 Prevent seasonal bank reserve shortages o Lend to banks during harvest season so they could continue to lend Work automatically under the gold standard 0 Banks would borrow when more loans were needed would repay when fewer loans were needed 0 Federal reserve notes must be backed by gold limits issue of currency 0 No policy directives needed Monetary policy tools of the federal reserve 0 Discount rate interest rate charged banks when they borrow from the Fed 0 Increase rategt banks reserve more lend less money supply decreases o Decrease rategt banks reserve less lend more money supply increases L Frank Baum c 18561919 a American author 0 Not sure if he was a Bryan supporter o Wrote an allegory of bimetallism Wizard of 02 0 Her powerful slippers were silver in the book Yellow brick road symbolized a dangerous golden road Dorothy is from a dif cult hard time in the west The scarecrow represents the simple farmer The tin woodsman was bewitched from the east represents a factory worker The cowardly lion was thought to be William Jennings Bryan The wizard could be any president not actually powerful O O O O OO o Wicked witch of the west was the forces of nature in the west Money demand depends on income and prices 0 How much of your income do you want to keep in liquid form 0 Carter glass 0 18581946 0 Virginia Representative and Senator Secretary of the Treasury in Wilson Administration 0 Sponsored Federal Reserve Act 1913
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