equations mid. 2 Flashcards
M1
currency held outside. banks. by. individs and. buisnesses plus. chequeaable depositis
m2.
M1 plus all other deposits – non chequable owned by individs and businesses
open market purchase
BOC buys secruitites and pays for them with reserves.
increases bank reserves and monetary base
open market saale
BOC sells securities. and paid for with reserves
decreases reserves
decreases monetary base
quantity of money
sum of currency held by inidiculaas and businesses plus bank deps
desired reserve ratio
bank reserves / total deposits
excess reserves
=. actual - desired reserves
currency drain ratio
= curreny to deposits
= currency by individ and busi / chequable dep x 100
money multipler
= (1 + C/d) / (c/d + r/d)
= change in quantiity of money / chnage in mon base
M1 multiplier
M1 / monetary base
M2 multiplier
M2 / monetary base
bank reserve ratio
= (currency held by banks + reserves at central bank) / CHEQUABLE DEP X 100
real mmoney
= nominal money / price level
demand for money relationship
= b/w quantiity of real money demanded and nominal int rate
- moves along curve
- increase in int rate = up
shift demnd for money curve
= L = decrease
= R = increase
velocity of circulation
= GDP or PY / quantity of money
PY = price level x real gdp
equation of exchange
MV = PY
inflation rate
money growth rate + rate of velocity change - Real GDPgrowth
exhcnage rate
= 1 / country currency
appreciation
rise in exhcnage rate
depreciation
decrease in exchnage rate
real exchnage rate REF
= (nominal exchnage rate x canadian price) / other country price
current accounts balance CAB
= exports -imports + net interest income + net transfers
sum of 3 accounts =
0
net exports = neg
world supplies funds to the coutnry
net exports = pos
country funds the rest of the world
debtor nation
= borrowed more than lent
creditor nation
= invested more in the world than invested in
government sector
net taxes - gov expend
private sector
savings - investment
aggregate supply
relationship between quantity of real GDP supplied and the price level
change in potential gdp
= moves LAS and SAS curves rightward
chnage in money wage rate
= supply decreseas and shifts left LAS dos not chnage
quantity of real gdp demanded
y = c+i+g+x-m
aggregate demand
relationship between quanitty of real GDP demanded and the price level
change in price level, quantity of real GDP demanded
… moves along the curve
AD curve slops down because ..
- wealth effect
- substitution effects
short run equilibrium
quantity real gdp demanded = supplied
real gdp above equilibrium
= move down SAS to equilib.
real gdp below equilibrium
= move up on SAS to equilib
above full employment equilib
= real gdp > potnetial
full employment equilib
= real gdp = potential
below full employment equilib
= potential. > real gdp
inflationary gap
real gdp > potential
no output gap =
potnetila = real
recessionary gap
= potnetial > real gdp
