Slides Flashcards
How dod the slides define potential output
The long term gdp trajectory that todays labor capital and technology can sustain on average
What does countercyclical and pro cyclical mean
Counter cyclical means that f.ex inflation rises when output decreases and pro cyclical means the opposite f.ex inflation rises with output
Okhuns law
Unemployment is countercyclical to growth
Why is gdp counted on market value
To include subsidies and taxes
What is counted as income when calculating gdp
Labor income and operating surplus or income to capital
How is the affect of the year chosen as base mittegated when calculating real gdp
They use a chained index aka they calculate it one year at a time
Is gdp a mesure of the income of a countrys residents
No only income eithin the borders as foreigners can accrue the capital income
What is gross national income gni
Gdp+net labor and capital income from abroad
What is net national income
GNI - replacement of depreciated capital
What is the NNP
Net national product is the same as NNI but uses gdp insted of GNI
What are shortcomes of gdp as a target
Does not mesure, happyness, welfare, home production, or equality and distribution of wealth and higher production also often means higher impact on nature
What is the difference between Z and Y
I(L) inventory investment Y=I+IL
Is IL, X and IM offen ignored
Yea
What is the effect on gdp if the autonomous parts increase
Gdp increases by more than the individual increase
Why is 1/(1-c1) called the multiplier
Becouse it multiplies the changes in the autonomous part
Shy dies thr multiplier effect exist in production
Becouse production depends on consumption which depends on production creating a spiral of growth
What are the risks of running an over expansionary fiscal policy
Higher government debt and inflation
How is the government automatically stabilizing
Furring bad times more transfers can be granted and during good times more can be taxed more without direct decisions made
What is RIX
The riksbanks bank note system that shifts the assets liability balance between Swedish banks
How does the riksbank control the amount overnight interest rate
Banks need reserves and if they have a negative balance they can lend for the repo rate or cheaper through RIX as the central bank has unlimited lending capability. Although the RIX lenders can lend at the deposit rate to the rixbank so it sets the floor on what is profitable too
What does the IS curve repersent
All instances of interest rate and output where ivestments = savings & demand = output the equalibrium in the goods market
What does the LM curve stand for
Not a curve and represents money supply set by central bank for chisen interest rate
What shifts the IS curve to the right
Lower taxes, increased G and increased consumer confidence
What determine the attractiveness of a bond to a buyer
The bonds interest rate compared to the forecasted central bank repo rate
What is quantitative easing
The unconventional monetary policy of buying large amounts of bonds with printed money to increase demand when the zero lower bound is already hit
What is the diference between CPIF and CPI
CPIF holds interest payments constant as the central bank controls these
How does quantitative easing affect the risk premium
It decreases it as the central bank dhowa it will buy the bond if needed
What are frictional, structural and cyclical unemployment
Between jobs, not being in demand and not being in demand right now
How high is normally the collectively bargained wage increase
2%
What are real wages
W/P
does z affect real wages
No only m does
Does output revert to potential in the medium run
Yes because inflation reverts to expected inflation
Why fo policymakers have an incentive to deviate from their inflation target
Because this lowers unemployment, this is why the central bank needs to be independant
What is the time inconsistency problrm
The governments incentive to under predict inflation
How does supply shocks affect potential output
It lowers it through lower equilibrium unemployment
