Econ 4.3

Friday, March 26, 1999

Announcements: Homeworks 6 and 7 are due on Monday.Answers for the past homeworks are on the web. Online Quzzes for Chapters 10, 11 and 12 will be taken offline on Wednesday, March 31, at 8 am.

Lecture notes:  

• The US National Debt is over 5 trillion dollars outstanding

Federal Reserve Board

• Beige Book -- summary of the overal state of the US economy for each of the 12 US Federal Reserve Districts
• Philadelphia is District 3

Fed's Major Monetary Policy Tools

• Open Market Operations
  • Contract money supply
    • Sells bonds in Market
  • Expand Money Supply
    • Buy Bonds in Market
• Discount Rate Changes
• Reserve Requirement Changes

• Earn Money: increase money supply, reduce interest rate, increase investment, increase GDP

Keynesian Monetary Policy Linkage to GDP

• Expansionary Policy
• Increase Money Supply
• Excess Supply of Money
• Fall in Interest Rates
• Increase Investment (EX-IM)
• Increase GDP | K J = Y