ASB AP Macro Economics Review Notes PDF

ASB AP Macro Economics 复习资料 资料制作者: 邱锦烨, 乔裔佳 负责检查的老师: 王清 1 / 25  Micro ∩ Macro Parts Circular flow diagram circular flow diagram 是对于商品服务市场以及生产要素市场的一个高度简化模 型 PPF (Production Possibility Frontier) *也叫 PPC（cu...

ASB AP Macro Economics 复习资料 资料制作者: 邱锦烨, 乔裔佳 负责检查的老师: 王清 1 / 25  Micro ∩ Macro Parts Circular flow diagram circular flow diagram 是对于商品服务市场以及生产要素市场的一个高度简化模 型 PPF (Production Possibility Frontier) *也叫 PPC（curve） PPF 是一张展示了在一个拥有有限的资源以及固定的技术条件下的经济社会所 能生产的最大商品数量的组合。图像斜率的绝对值是横坐标 good 的 opportunity cost。 ⚫ 为何 PPF 通常情况下是外凸(bow out)的？ - 在这里，因为资源的特殊性(某种 resource 更 适合生产某种商品), opportunity cost 随生产 量的增加而增加。 - 比如, 对于 Y 产品来说，在接近 300 的点生产则会因为对于 Y 产品的 best suited resource 已经用尽，而要多生产一个单位的 Y 产品则将要在 X 产品上 精通的技术工人调到 Y 生产部去，使得 X 产品损失的量更加大，所以机会成 本变高，斜率绝对值变大。 ⚫ PPF 什么时候外移？ - technology 的进步 - resource 的增加 2 / 25 Trade Trade can let both country better-off. Absolute advantage:可以用更少的 input 生产 Comparative advantage: 可以用更低的 opportunity cost 生产 *一个国家不可能在两个商品上都有 comparative advantage Trade 中要让两国各自生产有 comparative advantage 的产品，然后以两国的 opportunity cost 之间的一个价格交易 Basic Stuffs Financial investment captures what ordinary people mean when they say investment, namely, the purchase of assets like stocks, bonds, and real estate in the hope of reaping a financial gain. Economic investment only includes spending on the production and accumulation of newly created capital goods such as machinery, tools, factories, and warehouses 还有的后面会详细讲^_^ Classical Dichotomy: the theoretical separation of nominal variables and real variables Interest-Rate-Investment Relationship: The investment decision is a marginal-benefit–marginal-cost decision: The marginal benefit from investment is the expected rate of return businesses hope to realize. The marginal cost is the interest rate that must be paid for borrowed funds. Businesses only choose to borrow money when their expected rate of return is higher than the interest rate. 3 / 25 Shift factors of investment demand: 1. Acquisition, maintenance, and operating costs 2. Business tax 3. Technological change 4. Stock of capital goods on hand 5. Planned inventory changes 6. expectations Measuring Economy GDP (Gross Domestic Product): aggregate output as the dollar value of all final goods and services produced within the borders of a country in a year. To avoid multiple counting, GDP ignores intermediate goods, or products that are purchased for resale or further processing or manufacturing. Final goods: products that are purchased by their end users. Value of final good equal to the value added at each stage of production of the good. 每个 stage 之间 good 的 value 都有增加，后面的减前面的就是变化量。 GDP does not contain nonproduction transactions and 不在 market 里进行的交易。 经典的例子有 financial transactions 和黑市交易。 有两种计算 GDP 的方式：income (allocation) approach and expenditure (output) approach。在同一经济体中两种 approach 算出来的 GDP 应该是相等的。 Expenditure approach：Y = C+I+G+NX Y: output/GDP C (personal consumption): all expenditures by households on goods and services I (gross private domestic investment): final purchases of machinery, equipment, and tools by business enterprises, all construction, changes in inventories, and money spent on research and development (R&D) or for the creation of new works of art, music, writing, film, and so on. G (Government Purchases): government consumption expenditures and gross investment (i.e. infrastructure) NX (net export): export - import *NX 中要减掉 import 是因为 import 已经在 C 里面算过了。 4 / 25 *import 变化不会影响 GDP *政府给的补贴（包括失业和养老）不算 GDP 因为没有 production 产生 *Net investment = gross investment – depreciation. （GDP 只计算 gross） Other Accounts: NDP = GDP – depreciation NDP: net domestic product Depreciation: consumption of fixed capital NI = NDP + net foreign factor income NI = National Income Real GDP: adjusted for inflation Calculating Real GDP: use present quantities and base year prices Nominal GDP: not adjusted for inflation Calculating Nominal GDP: use present quantities and prices 𝐧𝐨𝐦𝐢𝐧𝐚𝐥 𝐆𝐃𝐏 GDP deflator = *100 𝐫𝐞𝐚𝐥 𝐆𝐃𝐏 𝐆𝐃𝐏 𝐝𝐞𝐟𝐥𝐚𝐭𝐨𝐫𝐜𝐮𝐫𝐫𝐞𝐧𝐭 𝐲𝐞𝐚𝐫 −𝐆𝐃𝐏 𝐝𝐞𝐟𝐥𝐚𝐭𝐨𝐫𝐥𝐚𝐬𝐭 𝐲𝐞𝐚𝐫 Inflation rate = 𝐆𝐃𝐏 𝐝𝐞𝐟𝐥𝐚𝐭𝐨𝐫𝐥𝐚𝐬𝐭 𝐲𝐞𝐚𝐫 *inflation rate 只能用 consecutive 2 year 的数据算 Inflation: the rise in the general level of prices; reduces the purchasing power of money. 1. Demand-pull inflation: positive demand shock increases the prices of the limited output 2. Cost-push inflation: negative supply shocks led by increase of input prices. Oil can be an example. Inflation can lead to redistribution effect: Nominal income is the number of dollars received as wages, rent, interest, or profit. Real income is a measure of the amount of goods and services nominal income can buy; it is the purchasing power of nominal income, or income adjusted for inflation. Real income = nominal income/ (price index*100) Unanticipated inflation can make some people better-off and some worse-off. 5 / 25  Hurt by unanticipated inflation Unaffected by Benefit from unanticipated inflation unanticipated inflation Fixed-income receiver Flexible-income receiver Debtor/borrowers 向别人 Savers 存钱的 借钱的 Creditors/lenders 借钱给别人的 Real interest rate is the percentage increase in purchasing power that the borrower pays the lender. Nominal interest rate is the percentage increase in money that the borrower pays the lender, including that resulting from the built-in expectation of inflation. Nominal int. rate = real int. rate + (expected rate of) inflation rate Deflation: the decrease in the general price level of goods and services Disinflation: decrease in inflation rate Hyperinflation: inflation at an extraordinary high rate (rapid growth of money supply) CPI (Consumer Price Index): the measure of the fixed basket (overall cost of goods and services) bought by a typical consumer\ BLS (Bureau of Labor Statistics) BLS 会选出 basket 然后计算 CPI 𝐩𝐫𝐢𝐜𝐞 𝐨𝐟 𝐭𝐡𝐞 𝐛𝐚𝐬𝐤𝐞𝐭 𝐜𝐮𝐫𝐫𝐞𝐧𝐭 𝐲𝐞𝐚𝐫 CPI = *100 𝐩𝐫𝐢𝐜𝐞 𝐨𝐟 𝐭𝐡𝐞 𝐛𝐚𝐬𝐤𝐞𝐭 𝐛𝐚𝐬𝐞 𝐲𝐞𝐚𝐫 𝐂𝐏𝐈𝐜𝐮𝐫𝐫𝐞𝐧𝐭 𝐲𝐞𝐚𝐫 −𝐂𝐏𝐈𝐥𝐚𝐬𝐭 𝐲𝐞𝐚𝐫 Inflation rate = 𝐂𝐏𝐈𝐥𝐚𝐬𝐭 𝐲𝐞𝐚𝐫 Criticisms of CPI: 1: substitution bias When the price of one good increase faster than that of another good, consumers substitute towards the cheaper good. However, the CPI uses a fixed basket, so the cost of living is overstated. 2: introduction of new goods When new goods are introduced, consumers have a larger variety of goods to choose from, which thereby decreases the amount of money needed to maintain the same living standard. However, the CPI does not decrease, since it assumes a fixed basket of goods. 6 / 25 3: unmeasured quality change When the quality of a good changes while price remains constant, so does consumer wellbeing and the cost of living. However, the CPI remains constant, since it measures only price changes. *4: social insurance and contract 有的时候为了应对 inflation 带来的影响，social insurance 和工资合同有时候会 加上根据 CPI 变化，使得这份钱的 purchasing power 不变 GDP deflator vs. CPI ① all vs. part: CPI 只计算 consumer goods GDP 包括 C, I, G, NX ② price of import goods change 时: CPI change GDP no change Production and Growth Economists define and measure economic growth as either: An increase in real GDP occurring over some time period. An increase in real GDP per capita occurring over some time period. *real GDP per capita = real GDP/ total population Rule of 70: we can find the number of years it will take for some measure to double, given its annual percentage increase, by dividing that percentage increase into the number 70. 𝟕𝟎 Approximate number of years required to double real GDP = 𝐚𝐧𝐧𝐮𝐚𝐥 𝐆𝐃𝐏 𝐠𝐫𝐨𝐰𝐭𝐡 𝐫𝐚𝐭𝐞 Growth can lead to change in: improved products and services, added leisure, environment, and the quality of life. Catching up effect: poorer countries tend to grow faster than rich ones because 1. diminishing marginal return for capital goods 2. follower country adopt leader country’s technology Determinants of Growth: 7 / 25 Supply factors: increase the potential size of GDP (LRAS) 1. Increases in the quantity and quality of natural resources. 2. Increases in the quantity and quality of human resources. 3. Increases in the supply (or stock) of capital goods. 4. Improvements in technology. Demand factors: acknowledges that economic growth requires that increases in total spending must occur if we are to actually realize the output gains made available by increased production capacity. Efficiency factors: to reach its full production potential, an economy must achieve economic efficiency as well as full employment. Productivity: Productivity = total output/ total inputs Per-unit production cost = total input costs/ total output Factors that affect productivity: 1. physical capital: stock of equipment and structures used to produce goods and services 2. human capital: knowledge and skills acquired through education, training, and experience 3. natural resources: inputs into production that are provided by nature, such as land, rivers, and mineral deposits. 可以分成 renewable and nonrenewable 4. technological knowledge: the understanding of the best way to produce goods and services Business Cycle Trough 也叫 bottom. 8 / 25 There are fluctuations in short-run but the trend of the economy in long run is increasing. Durable goods 受到 business cycle fluctuation 的影响比 nondurable goods 受到的 多。 Durable goods: goods that are used repeatedly over a period of years. Example can be cars. Nondurable goods: goods that are used after consumed in a short period of years, typically less than three years. Example can be a bottle of milk. Economic fluctuations are unpredictable and floating with the business cycle. When economic conditions fluctuate, say real GDP increases, the unemployment rate will decrease and the inflation rate will probably increase. Real GDP and unemployment rate are inversely related. When the economy faces a recession, production is cut, less workers are hired, the unemployment rate increases, wages decrease. Unemployment Unemployment arises over the business cycle. Labor force are people who are able and willing to work. 服兵役的、坐牢的、全 职学生、家庭主妇、已退休人员不算 labor force。Labor force 分为 employed 和 unemployed。 Employed Unemployed - includes both full and part time workers -actively looking for work but cannot find - includes workers on temporary leave, unpaid people work in a family business, or self-employed people 𝐮𝐧𝐞𝐦𝐩𝐥𝐨𝐲𝐞𝐝 Unemployment rate = *100% 𝐥𝐚𝐛𝐨𝐫 𝐟𝐨𝐫𝐜𝐞 𝐥𝐚𝐛𝐨𝐫 𝐟𝐨𝐫𝐜𝐞 Labor force participation rate= *100% 𝐰𝐨𝐫𝐤𝐢𝐧𝐠 𝐚𝐠𝐞 𝐩𝐨𝐩𝐮𝐥𝐚𝐭𝐢𝐨𝐧 *discouraged workers are not counted as unemployed because they are not currently looking for work Types of unemployment: 9 / 25 Frictional unemployment: consisting of search unemployment and wait unemployment 在未来找得到但要花时间找 Structural unemployment: workers who find that their skills and experience have become unneeded thus find that they have no marketable talents 不被需要。可以是 职业能力和技术不被需要，可能是被机器取代；也可以是地理上的，例如公司 搬到别的地方了，原来的员工就不被需要了。 Cyclical unemployment: caused by economic fluctuations 经济不好导致的失业 Full employment: when an economy only experiences frictional and structural unemployment. Full employment level of unemployment rate=NRU(natural rate of unemployment) At NRU, the economy is said to be producing at its potential output. Fully employed economy does not mean every labor force is employed. There are still frictional and structural unemployed labor. GDP gap = actual GDP - potential GDP GDP gap 负的时候代表着 actual unemployment rate ＞NRU GDP gap 正的时候代表着 actual unemployment rate ＜NRU Inaccuracies: -People who are not really unemployed might report themselves as unemployed to collect unemployment benefits -Discouraged workers: workers who cannot find a job and so leave the labor force -Part-time workers are recorded as employed just like full-time workers AD-AS model 横坐标是 real GDP 或者Yreal ，纵坐标是 Price level 10 / 25 AD: The aggregate-demand curve illustrates the relationship between quantity of all goods and services demanded in the economy and the price level. Why downward sloping: 1. real wealth effect (C): an increase in the price level leads to a decrease in the value of money, and more money is needed to buy the same goods and services. As a result, consumers feel poorer and spend less. 2. interest rate effect (I): an increase in the price level leads people to increase their money holdings. As a result, the amount of money they can lend out decreases, which leads to a leftward shift of the supply curve in the loanable funds market. This pushes real interest rates up, which increases the cost of borrowing and thus leads to lower investment. (price level inc→money demand inc→interest rate inc→investment dec) 3. exchange rate effect (NX): an increase in the price level leads to higher domestic interest rates, which makes domestic returns higher, and thus foreign investors wish to place their money in the domestic market. This increases the demand for the domestic currency and thus leads to appreciation, making foreign goods cheaper and domestic goods more expensive for foreign customers. This leads to an increase in imports and a decrease in exports, which leads to an overall decrease in net exports. (Domestic PL inc→buy foreign good→NX dec) AD shifts when C, or I, or G, or NX changes at all price levels. Immediate short run aggregate supply: It is horizontal because both input prices as well as output prices are fixed. SRAS (short run aggregate supply): input prices (e.g. wage) are fixed, but output prices can vary. The SRAS slopes upward because, with input prices fixed, changes in the price level will raise or lower real firm profits. Shift factors: supply shock - production cost changes 导致 SRAS 变动 1. Input prices 11 / 25 2. Productivity 3. Inflationary expectation→ wage increase，物价预期上升就吵着要高工资 4. Supply-side policy ex. Business tax or subsidy LRAS (long run aggregate supply): input prices as well as output prices can vary. LRAS is vertical because the economy will produce the full-employment output level no matter what the price level is and when both input prices as well as output prices are flexible, profit levels will always adjust to give firms exactly the right profit incentive to produce exactly the full-employment output level. LRAS 代表着 maximum sustainable capacity. LRAS 向右移动代表着 economic growth（同时 PPC shifts） Shift factors: 1. Quantity and quality of resource 2. Technology 3. Physical capital stock (投资) 影响 future economic growth rate Equilibrium in short run: Recessionary gap (AD): real output＜potential; deflation; cyclical unemployment ＞0 Inflationary gap (AD→): real output＞potential; demand-pull inflation; cyclical unemployment＜0 Stagflation 滞胀 (SRAS): real output＜potential; cost push inflation; recession with unemployment; dilemma for demand-side policy Long run Self-adjustment (classical school) Takes place in long run with no government intervention 过程：1. Flexible wages 2. Free shift of SRAS 3. Self-correction to full employment *都是 SRAS 动 Demand pull inflation: For labor: AD 右移，price level 上升；real wage 下降；higher wage；SRAS 左移 For capital: price level 上升；Inflation 上升；real interest rate 下降；higher nominal interest rate；SRAS 左移 12 / 25 Cost-push inflation: For labor: SRAS 左移，unemployment 上升; less wage；SRAS 右移 For capital: price level 上升；inflation 上升；由于 cost 很高，所以 investment 很 少；cannot ask for higher nominal interest rate，实际上不一定会增长 This process ca be painful as wide-spread business failures, layoffs, and plant closure usually follow the process Fiscal Policy 各种公式： DI (disposable income) = personal income – personal tax DI = S + C C = consumption S = saving ∆𝐂 MPC (marginal propensity to consume) = ∆𝐃𝐈 ∆𝐒 MPS (marginal propensity to save) = ∆𝐃𝐈 MPC+MPS = 1 𝐂 APC (average propensity to consume) = 𝐃𝐈 𝐒 APS (average propensity to save) = 𝐃𝐈 APC+APS = 1 Multiplier: Multiplier effect: a change in spending changes real GDP more than the initial change in spending. 𝐜𝐡𝐚𝐧𝐠𝐞 𝐢𝐧 𝐫𝐞𝐚𝐥 𝐆𝐃𝐏 𝟏 𝟏 Expenditure/Spending multiplier = = = 𝐢𝐧𝐢𝐭𝐢𝐚𝐥 𝐜𝐡𝐚𝐧𝐠𝐞 𝐢𝐧 𝐬𝐩𝐞𝐧𝐝𝐢𝐧𝐠 𝟏−𝐌𝐏𝐂 𝐌𝐏𝐒 𝟏 𝐌𝐏𝐂 Tax multiplier = –1= = spending multiplier-1 𝐌𝐏𝐒 𝐌𝐏𝐒 Total change in GDP = initial change * multiplier Greater the MPC is, more effective the fiscal policy will be Expenditure multiplier 影响力＞ tax multiplier 因为 people will save part of the money they get from the decrease in tax. *inflation 会减少 multiplier 对 real output 的实际影响 13 / 25 Fiscal policy (也叫 Discretionary policy): use policies to shift AD Expansionary Policy Contractionary Policy Combat recession 使经济增长 Combat demand-pull inflation 使经济衰退 造成 budget deficit（赤字） 造成 budget surplus（余额） 1. Increase 2. Decrease 1. Decrease 2. Increase tax government tax government spending spending Increase Government borrowing / Decrease Government borrowing / national national debt debt *crowding out effect Shortcoming of Fiscal Policy: 1. Crowding out effect: Recession 的时候要增加 G 使 AD 右移，政府去借钱去增加 spending，导致市场 里借钱的人 (demand)增多，interest rate 变高，private investment（GDP 里的 I 部分）降低, 实际 GDP 增加的量小于 spending multiplier 预测的量, capital stock decreases, slow down the GDP growth rate. *一般 fiscal policy 和 interest rate 没有关系，只有 crowding out effect 会影响 interest rate *这里 interest rate 提高是 loanable funds 里的内容，还没学 2. 需要时间：发现问题 recognition lag, 做决策 administrative lag, 实施政策 operational lag *Government Budget Budget = tax revenue – government spending；＜0 叫 deficit 赤字，＞0 叫 surplus 余额 如果这个国家很傻不管别的，只想着 balance government budget，那经济会更 烂： Recession 的时候 tax revenue 变少，所以花的钱也变少，导致 G (government purchase)降低，AD 减少，recession 加剧。 Expansion 的时候 tax revenue 变多，所以花的钱也变多，导致 G (government purchase)增多，AD 增多，expansion 加剧。 14 / 25 Automatic Stabilizer: 1. Proportional/ progressive income tax system Recession Expansion Tax revenue 下降 to support consumption Tax revenue 上升 to slow down C Government budget deficit Government budget surplus 2. Transfer Payment Recession Expansion Unemployment 上升导致 transfer Unemployment 下降导致 transfer payment 上升 payment 下降 造成 budget deficit 造成 budget surplus Money - any item that is generally accepted as payment for goods and services and repayments of debt Double coincidence of wants: the unlikely occurrence that two people each have a good the other want Function of money: 1. Medium of exchange: an item buyers give to sellers when they want to purchase good and service (及时交易) 2. Unit of account: the yardstick people use to post prices and record debts (一个 standard measure) 3. Store of value: an item people can use to transfer purchasing power from the present to the future (存钱) *Standard of deferred payment：不一定是瞬时的 ex. 付钱的时间可以不是买的时 间 (延时交易/预支) Money 演化史: (从上至下) Commodity money: takes the form of a commodity with intrinsic value Ex. cigarettes in POW camps 15 / 25 如果只用 commodity money, 如果 economy grows, the value of commodity money will decrease, purchasing power will decrease Precious Metal (e.g. 金银) Fiat money: money without intrinsic value, used as money because of government decree Ex. the US dollar, RMB Measures of the US Money Supply *今年刚改，ppt 和教材都不对 M0: currency (notes/coins in circulation) M1: currency, demand deposits, traveler’s checks, savings deposits, and other checkable deposits 可以每天随时用的 M2: everything in M1 plus near-money 经过简单转换可以用 (small-denominated time deposits （＜$100,000 ）, money market mutual funds (MMMF 像炒外汇), and a few minor categories) M2 is about five times larger than M1 Currency: the paper bills and coins in the hands of the public Demand deposits: balances in bank accounts that depositors can access on demand simply by writing a check Banking System: Federal Reserve (Fed): the central bank of the United States. Fed is not controlled by government. money supply: the quantity of money available in the economy monetary policy: the setting of the money supply by policymakers in the central bank 16 / 25 Because demand deposits are held in banks, the behavior of banks can influence the quantity of demand deposits and, therefore, the money supply. This section examines how banks affect the money supply and, in doing so, how they complicate the Fed’s job of controlling the money supply. 100-Percent-Reserve Banking: In this simple world, currency is the only form of money. The purpose of the bank is to give depositors a safe place to keep their money. Whenever a person deposits some money, the bank keeps the money in its vault until the depositor withdraws it, writes a check, or uses a debit card to access her balance. Deposits that banks have received but have not loaned out are called reserves. In this imaginary economy, all deposits are held as reserves, so this system is called 100- percent-reserve banking. T-account: Each deposit in this bank reduces currency and raises demand deposits by exactly the same amount, leaving the money supply unchanged. Thus, if banks hold all deposits in reserve, banks do not influence the supply of money. Fractional-reserve banking: a banking system in which banks hold only a fraction of deposits as reserves Reserve ratio: the fraction of deposits that banks must hold as reserves. 为了让有人 来取钱的时候银行有钱还，fed 设置了 reserve ratio，让银行必须持有一部分 钱，叫 required reserve Excess reserve= reserve – required reserve T-account for a bank with reserve ratio of 1/10: When banks hold only a fraction of deposits in reserve, the banking system creates 17 / 25 money. Balance sheet: Assets Liabilities and net worth Reserves Deposits Loans Capital (owners’ equity)/stock share Securities (bond) Debt Properties 两边一定相等：assets = liabilities + net worth Money Multiplier: - the amount of money the banking system generates with each dollar of reserves 人的存款变化： 还是刚才的例子中，假设银行不留下 excess reserve：bank 借了 90 出去，而如 果这 90 又被存到银行，deposits 就增加 90，这 90 中会有 1/10 存到 required reserve 里，剩下的 9/10 会继续借出去。以此类推，继续下去，这会增加 money supply。增加多少呢？增加 initial increase in money supply * money multiplier 这 么多。 Fed 从平民那里买 bond：平民的钱多了，平民的存款多了，然后与上述一致。 Fed 从 commercial bank 里买 bond：reserve 直接增加，不用放到 required reserve。Money supply 增加的量就是 value of bond purchased * multiplier。(卖 bond 反推) 𝟏 Money multiplier = 𝐫𝐫𝐫% (𝐫𝐞𝐪𝐮𝐢𝐫𝐞𝐝 𝐫𝐞𝐬𝐞𝐫𝐯𝐞 𝐫𝐚𝐭𝐢𝐨) Increase in money supply 有两种计算方法： 1. demand deposits*money multiplier – demand deposits 2. (demand deposits - demand deposits*reserve ratio)*money multiplier =第一笔 loan * money multiplier Money Demand: Transaction Demand: Dt. only changes with nominal GDP. When nominal GDP 18 / 25 increases, Dt increases. This is because households and firms will want more money for transactions if prices rise or if real output increases.在图上是 vertical 的 Assets Demand: Da. only changes with interest rate (inversely). Rate of interest is the opportunity cost of holding money as an asset.在图上是从左上向右下的 Total Demand of Money: Dm = Da + Dt. 在图上是从左上向右下的 横轴是 amount of money demanded and supplied, 纵轴是 interest rate. Equilibrium Interest Rates changes with shifts in money supply and money demand. Money Supply: Money supply is directly and only controlled by FED. It has nothing to do with interest rate. So, it is a vertical line. Bond: Bond 国债: 一张有法律证明的纸条。The buyer of a bond gives his or her money to Federal Gov in exchange for this promise of interest and eventual repayment of the amount borrowed. The buyer can hold the bond until maturity, or he can sell the bond at an earlier date to someone else. 19 / 25 Bond price and interest rate vary inversely: Annual interest payment = initial bond price * initial interest rate = final bond price * final interest rate Monetary Policy: Open market operations, reserve ratio, discount rate, interest on reserve Open market operations (OMO): - buying and selling of government securities or bonds - used to influence the money supply by changing commercial banks’ reserves *具体过程在 money multiplier 那里已经讲过了^-^ Required reserve ratio (rrr): - changes the money multiplier, promote money creation - change quantity of excess reserve, 但是 total reserve 不变 Discount rate: - FED 借 commercial bank 钱的 interest rate（当 commercial bank 的 reserve 不 够还钱的时候可以向 FED 借钱） - 如果 discount rate 比较高，commercial bank 就不太希望向 FED 借钱，所以 就持有比 required reserve 更多的 reserve 在手上，做出更少的 loan，这样更 不容易没钱还给取钱的人（影响 money supply） Interest on reserve (IOR): - FED 向 commercial bank 借钱（强制性的）的 interest rate - The higher that interest rate, the more of an incentive banks will have to reduce their risky commercial loans in order to instead increase the reserves that they hold at the Fed and thereby earn the risk-free interest rate that the Fed is paying on reserves. - 在 ample reserve 的时候比其他三个更有效 20 / 25 Federal funds rate (ffr): rate of interest that banks charge one another on overnight loans made from temporary excess reserves. - Interest on reserve ≤ FFR ≤ Discount rate Problems and Complications: Lags: recognition and operational 发现并实施 monetary policy 需要时间 Cyclical asymmetry: 因为 lag 可能等到 policy 有效的时候经济已经不是之前的情 况了 Liquidity trap: 在 ample reserve 的情况下可能无法刺激 investment，因为无法再 降低 interest rate，已经几乎到 0 了。 Limited Reserve 时的 monetary policy: Expansionary money policy: Restrictive money policy: promote economic growth reduce inflation Lower rrr Higher rrr Lower discount rate Higher discount rate Buy bonds from commercial banks Sell bonds to commercial banks Ample Reserve 时的 monetary policy: Lower IOR Higher IOR 21 / 25  Phillips Curve ⚫ short-run Phillips Curve (SRPC) A→B: AD left shift B→A: AD right shift (demand-pull inflation) SRPC1→SRPC2: SRAS left shift (stagflation) SRPC2→SRPC1: SRAS right shift Inflation rate & Unemployment rate inversely related 的原因: ① Okun’s Law (1% drop in employment 带来 around 2% drop in GDP) ② shift of AD (positive relation between inflation rate and real GDP) ⚫ Long-run Phillips Curve (LRPC) Vertical; 数值上=natural rate of unemployment Shift: frictional/ structure unemployment rate change affect unemployment benefit/企业结构变动/… Balance of Payment Account Balance of payment: 1 年内, 国家与国外的经济往来 (made by individual/firm/government) 22 / 25 current account + capital account = 0 ⚫ Current account: ① NX (good & services) →这个是主体 e.g. computer, car… ② NFI (net factor income) ③ current transfers (白送钱) 因为 NX 是主体→ trade surplus/deficit≈current account surplus/deficit (中国不符, 白送钱太多了) ⚫ Capital account = ∆foreign ownership of domestic asset (capital inflow) − ∆domestic ownership of foreign assets (capital outflow) 伴随资产的变更 (financial investment) e.g. 开厂 ⚫ Account balance inverse relationship between current & capital account e.g. 我有 trade surplus→拿着钱没用→在外国 invest→capital deficit Exchange rate: price of a currency in terms of another currency more foreign domestic Appreciation: { currency to exchange for same amount of { less domestic foreign currency Depreciation: 反过来 Fed 措施: 让 dollar 贬值→S 右移 (多印点钱) 让 dollar 升值→D 右移 对于这张图, Q 无所谓, 只需表现 Appreciation/Depreciation, 所以动 D/S 皆可 23 / 25 ⚫ Reason for Appreciation ① demand for US good & services increase  relatively cheaper  low PL ② demand for US financial assets increase  more profitable  higher IR ①②→ demand for dollar increase → Appreciation ⚫ Policies & Exchange Rate Expansionary fiscal policy: AD right shift→PL increase→Depreciation budget deficit→crowding-out→real IR increase→Appreciation Expansionary monetary policy: money supply increase→nominal IR decrease domestic Investment increase→AD right shift→见上→Depreciation foreign capital inflow decrease→Depreciation ⚫ Other things… Fixed exchange rate: LR market supply curve of perfect competition (horizontal) Central bank 会根据全球趋势调节发行货币的数量 Floating exchange rate 24 / 25 Citation: Economics: PRINCIPLES, PROBLEMS, AND POLICIES -20thEdition by Campbell R. McConnell, Stanley L. Brue, and Sean M. Flynn Principles of Economics by N. Gregory Mankiw 25 / 25