ECON 2000 Study Guide - Midterm Guide: Gross National Income, Real Interest Rate, Gdp Deflator
Document Summary
Chapters 1 and 2: endogenous vs. exogenous variables, definition of y, c, g, i and nx; stock vs. flow. Imputed values: rent homeowners pay themselves and wages of public service workers. Neoclassical theory of distribution: each factor input is paid its marginal product no economic profit given a competitive market and constant returns to scale. I = i (r) i is inversely related with real interest rate (cost of borrowing: government spending and taxes are exogenous, equilibrium when aggregate supply = aggregate demand. Y ( k , l)=c ( y t )+ g+i (r) o. S y c y t g o r adjusts to equilibrate the goods market and the loanable funds market simultaneously: in equilibrium, saving equals investment, which depends on r. In the long run e = on average; in the short run e may cause a change in p without a change in m increase in e increases p and decreases m/p to new equilibrium.
