Short Run and Long Run Effects of Money on Real GDP

Now that we have determined the cffccrs of monetary policy changes changes in the money supply on nominal interest rates, we turn our attention to the effect on the overall economy. In the short run, the effects of money supply changes on nominal interest rates will be the same for real interest rates. Let's first consider the effects of an increase in the money supply that leads to decreases in nominal and real interest rates. Lower real rates will cause businesses to invest more and...

Aggregate Supply and Aggregate Demand

The title says it all, but you should spend some quality time here getting the details down. This is the model of equilibrium output and price level for the overall economy and it is used repeatedly for analysis in the topic reviews that follow. Learn it well no breaks here. Learn the differences between the classical, Keynesian, and monetarist views of economic equilibrium and growth too. LOS 23.a Explain the factors that influence real GDP and iong-run and short-run aggregate supply, explain...

Markets for Factors of Production

Here, you want to gain an understanding of how the demand for inputs to production is determined and which factors influence the elasticity of demand for inputs, especially labor. The second key topic is how the market for financial capital establishes the price interest rate or financial capital and the factors that influence the supply of and demand for financial capital. Finally, you should gain an understanding of two components of the payments to productive resources, opportunity cost and...

LOS 14d Discuss the relationship between consumer surplus producer surplus and equilibrium

Consumers Surplus Over Production

Note that the efficient quantity of steel where marginal cost equals marginal benefit is also the quantity of production that maximizes total consumer surplus and producer surplus. The combination of consumers seeking to maximize consumer surplus and producers seeking to maximize producer surplus profits leads to the efficient allocation of resources to steel production because it maximizes the total benefit to society from steel production. We can say that when the demand curve for a good is...

LOS 15b Describe labor market equilibrium and explain the effects and inefficiencies of a minimum wage above the

Minimum Wage Long Run

A price floor is a minimum price that a buyer can offer for a good, service, or resource. If the price floor is below the equilibrium price, it will have no effect on equilibrium price and quantity. Figure 3 illustrates a price floor that is set above the equilibrium price. The result will be a surplus excess supply at the floor price, since the quantity supplied, Qj, exceeds the quantity demanded, Qj, at the floor price. There is a loss of efficiency deadweight loss because the quantity...