Saving, Investment and the Financial System

In class students reviewed Section 4 - Aggregate Demand and Aggregate Supply-for the quiz that will be administered on Monday, November 3rd.  Linked below is notes summarizing the section.

Summary Notes - Section 4

Afterwards, we took a look at the Financial System in the United States.  Module 22 has very important information that every contributing citizen should be educated upon.  Reread the section if you are having trouble understanding any of the concepts.  The notes for the section are attached below.

Notes - Savings, Investment and the Financial System

HW - Study for Section 4 Quiz
          Read Modules 23 and 24 - "Money"

Fiscal Policy and the Multiplier

In class we finished up section four by using the multiplier to estimate the impact of fiscal policy.  Afterwards, students took a practice quiz on section four.

The notes for Module 21 are attached below.

Notes - Fiscal Policy and te Multiplier

The practice quiz and answer key are attached below.

Practice Quiz #4

Answer Key - Practice Quiz #4


HW - Study for Quiz 
        - Read Module 22 and 23

Fiscal Policy

In class we reviewed the AD/SRAS/LRAS curves and talked about expansionary fiscal policy and contractionary fiscal policy.


Expansionary Fiscal Policy                                             Contractionary Fiscal Policy
-cut taxes                                                                            -increase taxes
-increase government spending                                         -decrease government
-increase government transfers                                          -decrease government transfers

The notes are attached and the homework is listed below.

Notes - Fiscal Policy

HW - pgs. 216-218 (2, 4, 5, 6, 7, 9, 10, 11, 13, 15)
          Module 20 questions
          Read Module 21

Putting the 3 curves together-AD, SRAS and LRAS

The economy can be in two states: (1) on the SRAS or (2) on both the SRAS and LRAS.

Remember the demand shocks - GWEP
and the supply shocks - PNC

Be familiar with short run effects of positive demand shock-inflationary gap- and negative demand shock - recessionary gap.

The homework is listed below and the notes are attached.

Notes - AD, SRAS and LRAS

HW - Complete Module 19 questions (to be turned in)
        - Read Module 20 and 21

Aggregate Demand and Aggregate Supply

In class students were introduced to the Aggregate Demand curve and learned it was downward sloping because of the Wealth effect, Interest Rate effect and Exchange Rate effect.  Shifts in the demand curve are due to GWEP (changes in: Government Policies, Wealth, Expectations, Physical Stock).

Afterwards, students were introduced to the two Aggregate Supply curves (SRAS/LRAS).  The SRAS curve is upward sloping because of "sticky wages" meaning wages are slow to increase and reduce production costs in the short run.  Shifts in the SRAS are due to PNC (changes in: Productivity, Nominal Wages, Commodity Prices).

The LRAS is vertical because in the LR all process are flexible.  Shifts in the LRAS are from (1) changes in Resources (CELL) and (2) changes in technology.


The homework is listed below and the notes are attached.

Notes - Aggregate Demand and Aggregate Supply


HW - Complete Module 17 and 18 Questions
        - Read Module 19

Income and Expenditure

In class students learned about income and expenditure.  Be familiar with the Marginal Propensity to Consume (MPC), the Marginal Propensity to Save (MPS) and Multiplier (1/(1-MPC)).

The homework is listed below and the notes are attached.

Notes - Income and Expenditure

HW - Read Module 17 and 18

Quiz - Output, Unemployment, Inflation

In class students took a quiz on Section 3 - Output, Unemployment and Inflation.  Since there were so many students missing we did not move forward.

For homework, read Module 16 (Income and Expenditure) and Module 17 (Aggregate Demand) which we will cover in depth next class.

Output, Unemployment and Inflation

In class we went over Module 14 and 15 questions.  Afterwards, we went over Section 3 - Output, Unemployment and Inflation.  Students also completed a Practice Quiz during class.

The notes are attached below as is the practice quiz and answer key. The homework is listed below.

Notes - Output, Unemployment and Inflation

Practice Quiz - Section 3

Answer Key - Practice Quiz

HW - Study for Quiz #3
        - Read Module #16

Inflation

In class we talked about inflation and the costs associated with rising price level (shoe-leather, menu, unit of account).  Know the different costs and also know the real interest rate = nominal interest rate - inflation. 

The notes are attached.

Notes - Inflation

HW - Finish Module 14/15 Questions (I will be checking they are complete)

**Quiz #3 - Section 3 - Modules 10-15 is scheduled for Tuesday 10/14