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Thursday, April 19

  1. page Fisher Efect edited Fisher Effect The Fisher Effect is the relationship between in ation and nominal interest rates…

    Fisher Effect
    The Fisher Effect is the relationship between in ation and nominal interest rates. Nominal
    interest rates are equal to real interest rates plus anticipated in ation. Nominal interest rates
    reflect anticipated in ation. When we have in ation, we anticipate more in ation, which
    causes nominal interest rates to increase.
    Reference :Dr Stephanie powers (class notes, practice test 1 version C) accessed April 19 2012

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  2. page Fiscal Policy, Deficit, and Surplus edited ... S. Powers, "Fiscal Policy" (Lecture Notes, School of Business, Red Deer AB, Winter 2…
    ...
    S. Powers, "Fiscal Policy" (Lecture Notes, School of Business, Red Deer AB, Winter 2012), Accessed April 17, 2012.
    Fiscal Policy ~ government's approach toward its own spending and taxation. Annual Budget contains estimates of government's revenues and expenditures.
    JohnBudget Surplus ~ net tax revenue in excess of government spending on goods and services.
    Budget Deficit ~ government spending on goods and services in excess of net tax revenues.
    John
    E. Sayre
    ...
    Ryerson, 2009), 383.383-384.
    "Fiscal policy is the means by which a government adjusts its levels of spending in order to monitor and influence a nation's economy. It is the sister strategy to monetary policy with which a central bank influences a nation's money supply. These two policies are used in various combinations in an effort to direct a country's economic goals."
    "How Fiscal Policy Works
    Fiscal policy is based on the theories of British economist John Maynard Keynes. Also known as Keynesian economics, this theory basically states that governments can influence macroeconomic productivity levels by increasing or decreasing tax levels and public spending. This influence, in turn, curbs inflation (generally considered to be healthy when at a level between 2-3%), increases employment and maintains a healthy value of money."
    ...
    19, 2012,
    http://www.investopedia.com/articles/04/051904.asp#axzz1sV3MYH00.
    http://www.investopedia.com/articles/04/051904.asp#axzz1sV3MYH00.
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  3. page Fiscal Policy, Deficit, and Surplus edited ... Fiscal Policy ~ government's approach toward its own spending and taxation. Annual Budget cont…
    ...
    Fiscal Policy ~ government's approach toward its own spending and taxation. Annual Budget contains estimates of government's revenues and expenditures.
    John E. Sayre and Alan J. Morris, Principles of Macroeconomics Edition 6 (Toronto: McGraw-Hill Ryerson, 2009), 383.
    "Fiscal policy is the means by which a government adjusts its levels of spending in order to monitor and influence a nation's economy. It is the sister strategy to monetary policy with which a central bank influences a nation's money supply. These two policies are used in various combinations in an effort to direct a country's economic goals."
    "How Fiscal Policy Works
    Fiscal policy is based on the theories of British economist John Maynard Keynes. Also known as Keynesian economics, this theory basically states that governments can influence macroeconomic productivity levels by increasing or decreasing tax levels and public spending. This influence, in turn, curbs inflation (generally considered to be healthy when at a level between 2-3%), increases employment and maintains a healthy value of money."
    Reem Heakal, "What is Fiscal Policy?", Investopedia, accessed April 19, 2012,
    http://www.investopedia.com/articles/04/051904.asp#axzz1sV3MYH00.

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  4. page Fiscal Policy, Deficit, and Surplus edited ... Expansionary Gap ( Use contractionary fiscal policy) T = UP, = AD = UP. ... 17, 2012. …
    ...
    Expansionary Gap ( Use contractionary fiscal policy)
    T = UP, = AD = UP.
    ...
    17, 2012.
    Fiscal Policy ~ government's approach toward its own spending and taxation. Annual Budget contains estimates of government's revenues and expenditures.
    John E. Sayre and Alan J. Morris, Principles of Macroeconomics Edition 6 (Toronto: McGraw-Hill Ryerson, 2009), 383.

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  5. page Velocity of Money and Cambridge K edited ... Cambridge K means the average length of time a dollar is held before being spent. The higher t…
    ...
    Cambridge K means the average length of time a dollar is held before being spent. The higher the velocity, the less we hold money.
    Dr. Stephanie Powers, ECON 101, Economic Growth Notes.
    Velocity of money (Velocity of circulation) ~
    the number of times per year that the average unit of currency if spent (or turns over) buying final goods and services.
    Also known as the number of times that money is actually used each year.
    EX: If GDP in a given year was $800 billion and the supply of money is $80 billion, the velocity would be 10.
    Which this means is that every loonie, every $5 bill, every $10 bill, and so on, changes hands, from person to person, an average of 10 times during the year.
    The velocity of money therefore is the rate at which the money suppy turns over in generating income.
    M is supply of money
    V is velocity of circulation
    Q is quantity of goods and services sold
    P is a composite (or index) of their prices
    equation of exchange ~ MV=PQ
    John E. Sayre and Alan J. Morris, Principles of Macroeconomics Edition 6 (Toronto: McGraw-Hill Ryerson, 2009), 290-291.
    Cambridge K ~
    Average length of time a dollar is held before being spent.
    Equation ~ Cambridge K = 1/V
    EX: Pizza and Calzones - K=5 1/5 * 365 days = 73 days
    K=3 1/3 * 365 days = 122 days
    Dr. Stephanie Powers, "Monetary Policy" (lecture, slide 37, Red Deer College, Red Deer, AB, April 2, 2012).

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  6. page Effect of Changes in Supply and Demand on Exchange Rates edited Effect of Changes in Supply and Demand on Exchange Rates As "As supply and ... in importa…
    Effect of Changes in Supply and Demand on Exchange Rates
    As"As supply and
    ...
    in important ways.ways."
    The above information was taken from the info below and will be revisited after we have looked at it in class.
    "Exchange Rates and Exchange: How Money Affects Trade," Econ Ed Link, accessed March 28th, 2012,
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Wednesday, April 18

  1. page Effect of Government Debt on the Economy edited ... - Decreased ability to borrow The more national debt the less likely we will pay back. The…
    ...
    - Decreased ability to borrow
    The more national debt the less likely we will pay back.
    The more national debt, the less likely a country is to pay it back. As debt increases as a
    percentage of GDP, it is more difficult for the country to service the debt. As the
    country's credit rating decrease it becomes harder to find individuals and countries
    willing to lend to the country.

    - Increased interest rates
    With no lender, the country has to increase the interest rates to sell their bonds.
    If no one is willing to lend the country money, the country will be forced to pay higher
    interest rates to sell their bonds. The problem with higher interest rates is that
    government spending can crowd out investment spending and suppress economic growth.

    - Increased taxes
    To pay off debt, raise taxes. This also decreases consumption spending which would lead to slow economic growth.
    - Increased money supply
    A last resort for funding a national government when the government has defi cit
    spending and difficulty borrowing, is for the government to print banknotes or increase
    the money supply using quantitative easing. The problem with this solution to debt is
    that it leads to inflation.

    S.Powers, Econ 101 Section C, "Fiscal Policy" Slides, Slide 22, Accessed April 18, 2012
    S.Powers, Econ 101 Section C, Practice Test B
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  2. page What is Money edited What is Money The primary function of money is that it serves as a medium of exchange. Without mon…
    What is Money
    The primary function of money is that it serves as a medium of exchange. Without money, people would be forced to barter goods and services directly. However, barter requires a "double coincidence of wants". This means that if I am to trade with you, you must have what I want, and I must have what you want. If this is not the case, then we must try to find a third, fourth, or fifth party to act as intermediary. This would mean that to obtain a bare minimum of goods and services through barter, a person would spend far more time and effort in exchanging than in producing.
    ...
    is a store(store of wealth and awealth, unit of account and Medium of exchange ( What we use money for)) that allows
    John Sayre, Alan Morris, Principles of Macroeconomics Edition 6, page 251, accessed April 18, 2012.
    Characteristics of money:
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  3. page What is Money edited ... Checkbook money (deposits) - money that exists in trust on the books of banks or in a computer…
    ...
    Checkbook money (deposits) - money that exists in trust on the books of banks or in a computer database. This is the money in your bank account.
    John Sayre, Alan Morris, Principles of Macroeconomics Edition 6, page 253-254, accessed April 18, 2012.
    3 purposes of money:
    1. Medium of exchange
    2. Store of wealth
    3. Unit of account
    S. Powers, "Practice Final Exam C", Accessed April 18, 2012

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  4. page Aggregate Supply edited ... * If potential GDP increases, aggregate supply will also increase. An increase in any of the …
    ...
    * If potential GDP increases, aggregate supply will also increase.
    An increase in any of the determinants will shift the aggregate supply curve to the right which will equally shift potential GDP (economic growth). A decrease in any of the determinants will shift the aggregate suply curve to the left. (An increase in aggregate supply, leads to a higher real GDP but lower prices)
    Neo-classical theory of aggregate supply:
    Aggregate supply is vertical and equal to potential GDP. In the long run the economy is at full employment. The aggregate supply is the total value of all final goods and services when all resources are utilized. Neo-classical theory suggests that an increase in aggregate demand will lead to inflation. The only way to grow the economy is to increase natural resources, capital goods, technology and/or the quality or quantity of workers.
    Keynesian theory of aggregate supply:
    Aggregate supply is vertical. Big business and labour unions cause prices and wages to be inflexible/sticky. Changes in aggregate demand have little impact on inflation. Economic growth can be achieved by increasing aggregate demand- this happens by increasing government spending and investment spending.
    Stephanie Powers, Solutions to Practice Final: Version A, (ECON 101 Winter 2012)

    John E. Sayre. and Alan J. Morris, Principle of Macroeconomics, (U.S.A.: McGraw-Hill Ryerson Limited, 2009), 168, 178-179, 182-183 Graph is from slide 9 Of Stephanie Power Lecture Notes
    {AG_supply.png}
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