These are important revision summary notes to be studied in conjunction with the other study materials. This will save you much needed time in your studies which you can allocate to other modules. These are the kind of revision materials that helps you finish your degree quicker. It worked for me a...
Contents
WHAT IS MONEY? ................................................................................................................................... 6
FUNCTIONS OF MONEY........................................................................................................................... 6
Medium of exchange........................................................................................................................... 6
Money is used as a unit of account. .................................................................................................... 7
Store of value/wealth .......................................................................................................................... 7
SUPPLY OF MONEY .............................................................................................................................. 9
A right shift of money supply represents an increase of MS ..................................................... 11
CREDIT CARDS VS MONEY ................................................................................................................. 12
DEMAND FOR MONEY .......................................................................................................................... 12
Motives of holding money .................................................................................................................... 12
1. Transaction motive................................................................................................................. 12
2. Precautionary Motive – .......................................................................................................... 13
3. Speculative purposes ............................................................................................................. 13
Factors affecting Money Demand (MD)............................................................................................ 13
Equilibrium in money market ............................................................................................................ 15
Monetary Policy ................................................................................................................................ 16
Impact of expansionary MP (increase of MS) ............................................................................... 16
SELF ASSESSMENT QUESTIONS ............................................................................................................. 17
MEASURING PERFOMANCE OF THE ECONOMY ................................................................................... 19
The Variables ..................................................................................................................................... 20
Defining GDP ..................................................................................................................................... 20
Ways of measuring GDP .................................................................................................................... 20
Expenditure Approach ................................................................................................................... 21
Consumption Approach ................................................................................................................. 21
Investment ..................................................................................................................................... 21
Stocks vs. Flows ............................................................................................................................. 22
Government Spending ................................................................................................................... 22
Exports and Imports ...................................................................................................................... 22
Value added....................................................................................................................................... 23
2
www.lucianotutorials.com 012 751 7588
, We simply Economics
Illustration...................................................................................................................................... 23
Final goods, value added, and GDP ............................................................................................... 24
Real vs. nominal GDP ..................................................................................................................... 24
The price level................................................................................................................................ 25
GDP Deflator .................................................................................................................................. 25
Consumer Price Index (CPI) ........................................................................................................... 25
Measuring Inflation ....................................................................................................................... 27
CPI vs. GDP Deflator ...................................................................................................................... 27
INCOME DETERMINATION:KEYNISIAN MODEL .................................................................................... 29
Assumptions ...................................................................................................................................... 29
Differences from the Classical Model .......................................................................................... 29
T h e Keynesian Model w/out Government ............................................................................... 29
T h e Keynesian Model w / Government ................................................................................... 39
SELF ASSESSMENT QUESTIONS ......................................................................................................... 43
AGGREAGATE DEMAND / AGGEREGATE SUPPLY MODEL .................................................................... 44
FACTORS THAT SHIFT AD ................................................................................................................... 44
SHIFTS IN AGGREGATE SUPPLY ......................................................................................................... 47
What will change LRAS? Same factors that shift the PPF ................................................................. 47
CHANGES IN THE SRAS ...................................................................................................................... 48
UNANTICIPATED INCREASES IN SRAS ................................................................................................ 49
UNANTICIPATED DECREASES IN SRAS ............................................................................................... 49
UNEMPLOYMENT, BUSINESS CYCLES AND INFLATION ............................ Error! Bookmark not defined.
The Business Cycle ............................................................................................................................ 51
III. Unemployment ...................................................................................................................... 54
Seasonal Unemployment .................................................................................................................. 55
Frictional Unemployment ................................................................................................................. 55
Structural Unemployment ................................................................................................................ 56
Cyclical Unemployment ........................................................................................................................ 56
Inflation ................................................................................................................................................. 58
Measuring Inflation .......................................................................... Error! Bookmark not defined.
3
www.lucianotutorials.com 012 751 7588
, We simply Economics
4
www.lucianotutorials.com 012 751 7588
, We simply Economics
5
www.lucianotutorials.com 012 751 7588
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller ivann. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $10.16. You're not tied to anything after your purchase.
