Sixth Week of Notes
Sixth Week of Notes ECON2020
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This 2 page Class Notes was uploaded by Morgan Genelin on Tuesday March 22, 2016. The Class Notes belongs to ECON2020 at University of Colorado taught by Murat Iyugan in Winter 2016. Since its upload, it has received 43 views. For similar materials see Principles of Macroeconomics in Economcs at University of Colorado.
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Date Created: 03/22/16
February 23, 2016 EXPERIMENT QUIZ February 25, 2016 Continuing off of the list from last week 4. Short term unemployment a) Cyclical: switch between jobs a. When above the 5% average, this is the cause and that is bad b) EXAMPLE: a. At least ½ unemployment rate is chronic unemployment i. 100 people story: 1 chronic, 12 unemployed 1 each month 1. 2%, 1% caused by the chronic 5. Nominal (W) vs. Real Wages (W/P) a) Nominal wage rate a. Given unit of time of work b. it is a upper case W b) Real Wage a. Use P (CPI of a point in time i.e. the price of living) i. Used more often to see real wage worth ii. W/P or lowercase W 6. Cost of Inflation P (t+1 −P(t) a) ∗100=π (This is the inflation RATE) P(t) a. P is CPI again. P(t) is today, P(t+1) is tomorrow b) Expected inflation a. Opportunity to prepare for this inflation b. The expected costs are just small changes i. Cost of carrying money in high inflation countries is huge 1. Always put in a savings to gain interest c) Unexpected inflation a. BAD b. Borrowers win, lenders loose i. Only if you get a nominal interest rate (doesn’t change) 7. Nominal vs. Real Interest Rates a) Nominal: lower case I a. D(t) is deposit of “today”, D(t+1) is deposit tomorrow 1+i ∗D(t)=D(t+1) b. i. Doesn’t give the cost of inflation or anything like that b) Real: lower case r a. #goods you consume tomorrow= #goods today D t+1 ) ( 1+i∗D(t) i. P(t+1) = 1+π ∗P(t) (These are the equations related to those words above.) ii. SO for REAL interest rates: D (t+1 ) D(t) 1. = (1+r) P(t+1) P(t) b. i = r + π i. As long as all are small. This is the Fisher Equation
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