[ECON308] - Final Exam Guide - Everything you need to know! (69 pages long)
30 Mar 2017
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If the fed chooses to pursue its long-run economic objectives by controlling interest rates, one of the risks of this strategy is: increases in spending necessary to support gdp growth may become unresponsive to lower interest rates. 3 reasons banks held excess reserves: held as insurance policy to protect change in asset value, no safe lending opportunities, fed was paying interest on reserves fed balance sheet, assets: securities, liabilities: currency & bank reserves (monetary base) M1: coins and currency, demand deposits, misc. catergories. M2: m1, small time deposits (cds, small savings deposits, personal money market mutual funds lenders/savers: households borrowers/spenders: governments/firms zero coupon bond: (discount bond, sold at price well below face value, collect interest when the bond matures. Fv = pv(1+i)n i = (fv)1/n all minus 1 (pv) Pv = pmt + . + pmt + fv (1+i)1 (1+i)n (1+i)n. Pv = pmt (1 - (1/(1+i)n ) + fv i (1+i)n.
