macro fun whoohooo

human capital

H (education, skills)

human resources

N

public savings

T-G

Velocity

V=PY / M where P is GDP deflator Y is real GDP M is quantity of money

national savings

Y-C-G=I or (Y-T-C) + (T-G)

private savings

Y-T-C

production function

Y=AF(L,K,H, N) where A is reflection of the available production technology

govt budget deficit chart

a budget deficit decreases the supply of loanable funds, reduces the equilibrium quantity and raises the equilibrium interest rate

The economy of Greece contains 2000 of $1 bills a) if people hold all money as demand deposits and banks maintain a reserve ratio at 10 percent, what is the quantity of money? b) if people hold equal amounts of currency and demand deposits and banks maintain a reserve ratio if 10 percent, what is the quantity of money?

a) 10 percent of $2000 is $1800 and $1800 x 10 is $18,000 add $2000 to that and get $20,000 b) $2000/10 percent = 20,000

Assume tha banking system has total reserves of $100 billion. Assume also that required reserves are 10 percent. a) what is the MM? B) what is the MS? Assume that the fed now raises the resources to 20 percent of deposits. a) what is the change in reserve and money supply?

a) MM is 10 because 1 / .1 is 10 b) MS is 1000 because 100 x 10 a) MM is 5 because 1 . .2=5 b) MS is $500 because 5 x 100 = 500

labor force

employed + unemployed

physical capital

k (machines, equipment)

labor force participation rate

labor force / adult pop x 100

the fisher effect

real interest rate= nominal interest rate - inflation rate

tax incentives chart

tax incentives increase the supply of loanable funds, raise the equilibrium quantity and reduces the equilibrium interest rate

how to find T

to find T, use the formula for the public savings (T-G). G is given. T-G will always be a negative number because it is a budget deficit. G is greater than T. T-G = -300 which is the budget deficit now replace G with 2 trillion. T-G = -.3 because 300 billion is .3 trillion T-2 trillin = -.3 T= 1.7

adult population

unemployed + employed + not in labor force

unemployment rate

unemployment / labor force x 100

If the tax rate is 40 percent, compute the before tax rate and the after tax rate for each case a) the nominal interest rate is 10 percent and the inflation is 5 percent b) the nominal interest rate is 6 percent and the inflation rate is 2 percent c) the nominal interest rate is 4 percent and the inflation rate is 1 percent

a) real interest rate is 10-5= 5 percent nominal interest rate before tax is 10 x (1-.40) = 6 real interest rate after tax is 6-5=1 percent b) real interest rate is 6-2= 4 percent nominal interest rate before tax is 6 x (1-.40) = 3.6 real interest rate after tax is 3.6-2= 1.4 percent c) real interest rate is 4-1= 3 percent nominal interest rate before tax is 4 x (1-.40) = 2.4 real interest rate after tax is 2.4-1 = 1.4 percent `

investment tax credit chart

an investment tax credit increases the demand for loanable funds, raises the equilibrium quantity and raises the equilibrium interest rate