AS.180.101 Lecture Notes - Lecture 16: Loanable Funds, Fisher Equation, Seasonal Adjustment
Document Summary
Adam"s smith invisible hand = desirable outcomes. Quarterly: three month flow multiplied by 4. Nairu non accelerating rate of pi. Divide the growth arte into 70: 2% growth = 70/2 = 35 years that"s when it will double. Ae model: output v spending, inventories swing, prices steady. Aggregate demand/aggregate supply: demand v supply prices and quantities shift. Expanded loanable funds model: t-bills v t-bonds v corporate bonds, households: supply funds, gov"t corporations: demand funds, frb: buys and sells t-bills to target interest rates. Lras output determined by the number of workers, the lvel of tech, and the capital stock. Lras is a straight line at the level of potential or full-employment gdp. Dynamic equilibrium: how policymakers and business people think about ad-as. We don"t have a stable price level. We don"t have a stable output level. Adverse supply shocks are the worst of both worlds: inflation accelerates and output falls.
