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Give a brief description of the transmission mechanism
1. When the central bank target rate increases, other interest rates in the economy will increase (and the money supply will decrease, but that is not important here).
2. With higher interest rates, it is more expensive to borrow and more advantageous to save. Therefore, consumption and investment will decrease (we say that the central bank "cools off" the economy).
3. As consumption and investment fall, GDP is reduced and unemployment will rise. This will cause inflation and the growth rate in wages to fall.
Wholesale Prices, Consumer Prices and Inflation From the man on the street to the highest policy makers, the behavior of prices is of intimate concern. Prices determine the pu
Goods in the circular flow If Y R is total value of all goods going from F R to F H , then total value added from all firms in the F R box is equal to Y R (they don't pu
The Neoclassical thinking that assumes that all firms are established with the intention of making profit has been challenged by the managerial discretion models. How successful ha
If you have $10,000 to start a lawn-cutting business, the interest rate is 6 percent, your annual cost of raw materials are $4,000, and the earnings you sacrifice from working at a
Industrial Production and Agricultural Production Industrial production and agricultural production are aggregate measures of sectoral outputs. It is a common practice to divi
We have been looking at just the Additional Marginal Opportunity Costs of our choices. What about the total cost? For example, we see and hear ads all the time about different cell
America can produce 100 shirts or 20 computers and China can produce 100 shirts or 10 computers. With trade, who exports shirts? Which country benefits from the trade?
long run supply curve
PREPARE AN ESSAY ON THE CONCEPT OF MAXIMIZATION AND THE ASSUMPTIONS ASSOCIATED WITH THE BEHAVIOR OF THE ECONOMIC MAN
Christina Romer and Jared Bernstein in "The Job Impact of the American Recovery and Reinvestment Plan" calibrated the impact of the proposed expansionary fiscal policy (we know it
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