Term
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Definition
| The total amount of Domestic Goods and Services that the four major components-Consumers, Investors,Goverment, and Forgein Investors are willing to Buy. |
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Definition
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Term
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Definition
People spend when they are young, Save when they are in thier mid-years,and spend when they are older
-Gives a predictable line of consumption over a lifetime. |
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Term
| 5 Determinants of Consumption |
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Definition
Current Disposable Income
Real Interest rate
Expected Future Disposable Income
Household Wealth
Price Level |
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Term
| Current Disposable Income |
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Definition
| Yd=Income-Taxes+ transfer Payments |
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Term
| Future Expected Disposable Income |
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Definition
| Same as Disposable income-Expected |
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Term
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Definition
| Nominal Interest Rate-Inflation |
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Term
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Definition
=Nominal Interest rate
=Real interest rate
=Inflation |
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Term
| As Real interest rate Rises... |
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Definition
Consumption Goes down since:
a.)Costs more to borrow
b.) More incentive to Save |
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Term
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Definition
| Household Assets-Household Liabilities |
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Term
Price Level
as it goes up... |
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Definition
| Wealth goes down, Consumption Goes down |
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Term
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Definition
C = f ( YD, YDe , r , Wealth, Price level)
+ + - + - |
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Term
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Definition
Plant and equipment
Housing
Inventories |
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Term
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Definition
1.) Finished Goods Not sold yet
2.) Raw materials not Used yet
3.)Unfinished goods still in the production Process |
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Term
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Definition
| Gross Investment-Depreciation (dK) K=capital stock |
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Term
Present Discounted Value
-Future value Formula |
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Definition
Future Value N years from Today:
F = $PDV (1 + r)N
Present Discounted Value Of funds received Today:
F/1+r^N |
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Term
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Definition
| (Rev1/1+r )+ (Rev2/(1+r)^2...ect |
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Term
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Definition
| Same as PDV of Revanues Only with Costs |
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Term
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Definition
| PDV of Project revenues-PDV of Project Costs |
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Term
(In respect to eNPV)
if R goes up |
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Definition
| PDV(e revenue)goes down, PDV (e Costs) go down, NPV goes down |
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Term
| Why does NPV go down if r goes up? |
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Definition
| Because most costs will occur before the revenues are received. |
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Term
| Determinants of Investment |
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Definition
Real interest rate
Current Levels of Y
Expected Levels of Y
Tax Policy |
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Term
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Definition
I = f (r, Y, Ye, Tax policy)
- , +,+ |
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Term
| Investment is the most aspect of GDP because... |
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Definition
The Investment Accelorator
Investment can Be Postponed
Uncertainty and Expectations |
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Term
| The Investment Accelerator |
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Definition
| Change in GDP affects incentive to invest |
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Term
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Definition
| Price Of one Currency in terms of another currency |
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Term
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Definition
| Price of goods in one country in terms of the price of goods in another country |
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Term
| Real Exchange rate fomrula |
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Definition
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Term
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Definition
E changes
Pdom changes
Pfor changes |
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Term
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Definition
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Term
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Definition
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Term
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Definition
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Term
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Definition
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Term
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Definition
| Imorted more than we exported |
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Term
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Definition
| Exported more than we imorted |
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Term
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Definition
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Term
| 4 things that Exports depend on |
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Definition
e=Real exchange rate
Yfor=How much money another country has
trade policies
tastes and preferences of other countries for our things
expots=f(e,Yfor,policies, preferences) |
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Term
If the exchange rate goes up...
if Yfor increases...
if Ydom increases |
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Definition
Exports decrease, imports increase
Exports increase
Imports increase |
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Term
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Definition
| =F(e,Yfor,Ydom,policies, Preferences) |
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Term
| If real exchange rate increases... |
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Definition
demand for dollar denominated assets increase
demand for dollar increases
nominal exchange rate increases
real exchange rate increases
exports decrease, imports increase
Net exports decreases |
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Term
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Definition
| the recored of a country's trade in goods, services, and assets |
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Term
| Balance of Payments is made up of.. |
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Definition
Current account
Financial Account |
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Term
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Definition
| The trade in goods and services (NX) |
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Term
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Definition
Measures Trade in assets
(amount of capital coming in-Amount of capital leaving)=Net Capital Inflow |
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Term
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Definition
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Term
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Definition
| Domestic residence investment in for assets-Forein residence investment in Domestic assets (also called net foreign investment) |
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Term
| Foreign Direct investment |
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Definition
| Domestic residence actively manage a firm in a foreign country |
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Term
| Forgein Portfolio Investment |
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Definition
| Domestic residents purchase foreign stocks or bonds (at an interest rate) supplying loanable funds to foreign companies. |
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Term
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Definition
| The imbalance of a countries trade in assets |
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Term
| Variables that influence NCO |
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Definition
-the real interest rate paid on forgein investments
-the real interest rate paid on domestic investments
-percieved risks in holding forgein assets
-Goverment policies affecting forgien ownership of assets |
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Term
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Definition
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Term
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Definition
| Machines, factories, Office blds. |
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Term
| Savings affects----> which affects----> |
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Definition
| Savings affects financial capital which affects Physical capital |
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Term
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Definition
| Private savings+ Public savings (Taxes-Gov spend) |
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Term
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Definition
| Investment-Net capital Outflow |
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Term
| Equilibrium in Loanable Funds Market |
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Definition
| Where quantity supplied=Quantity demanded |
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Term
| Increase in quantity demanded= |
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Definition
Increase in quantity Supplied
Shifts the Demand curve to the right. |
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Term
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Definition
Decrease in demand
Shifts the supply curve to the left |
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Term
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Definition
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Term
| Aggregate Demand Curve (AD) |
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Definition
| Relates the country's price level to the aggregate expenditure on that countries goods and services |
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Term
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Definition
| A measure of the overall Price level such as GDP deflator or CPI indicator |
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Term
| A point on the Aggregate demand Curve is called... |
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Definition
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Term
| 3 reasons Aggregate demand curve slopes down |
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Definition
Wealth effect
Interest rate effect
International trade effect |
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Term
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Definition
| as price level increases purchasing power of a household decreases. |
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Term
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Definition
As r increases fewer projects worth undertaking becuase of the NPV
-when P increases, r increases,C decreases, Investment decreases---> as Net exports decrease, AG decreases.
It costs more to borrow the money to finance projects |
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Term
| International Trade effect |
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Definition
| As price level goes up, real exchange rate goes up, cuases Net exports to go down and AG to go down as well |
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Term
| Increase in AGD shifts curve to the... |
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Definition
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Term
| What shifts The AGD curve? |
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Definition
Government Policies
Changes in Expectations
Changes in foreign Variables |
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Term
| Reasons For Price Stickyness |
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Definition
-Consumer relations
-Menu Costs
-Staggered Price Setting
-Coordination Failure
-Contracts |
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Term
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Definition
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Term
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Definition
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Term
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Definition
| Results from the shift of the SRAS to the right from Gov. Spending or decrease in taxes. |
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