ECN 203 Study Guide - Midterm Guide: Capital Market, Aggregate Supply, Aggregate Demand
Document Summary
What is potential gdp: 3 types. Demand-deficient unemployment: natural rate of unemployment, reasons why unemployment rate may understate the amount of true unemployment. Long-run aggregate supply (las) vertical at full employment (y f ) In the long run, all markets have fully adjusted. Macro model combining as, ad and las (changes in wages or price of oil) Investment (i) determined in long-term financial capital market: supply of financial capital. What shifts supply of long-term financial capital? changes in: lend capital. Entry and exit of funds international capital flow, the risk, higher the interest want to charge) wealth in the economy: demand for financial capital. Shifts are due to business confidence: expectations about the future (willing to demand and invest more capital if expectations are good: long-term financial capital market. If currency strengthens x decreases, m increases. If currency weakens x increases, m decreases. Equilibrium wage (w) and quantity of labor (n) Show how non-interventionists argue economy self corrects when there"s.
