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Formulas to memorize: P1, C13, 14, 18
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Gravity
Terms in this set (31)
M = cr formula is
cr+1/cr+rr xB
Simple money demand function is
M/P = kY
Fisher equation is
i = r + pie
What happens to price level when one-time jump in M/inflation?
jump/no change
What happens if announce of future higher money growth:
immediate change in p
a = constant fraction of income =
MPK*K/Y
1-a = constant fraction of income =
MPL*L/Y
F(K, L) Cobb Douglas is
AK^(a)L^(1-a)
MPL =
(1-a)A(K/L)^a
MPK =
aA(L/K)^(1-a)
V = (2) formulas
1/k, y/m/p
RER =
nominal
(P/P
)
Money multiplier
1/rr
UR =
U/U+E
LFPR =
E+U/total
Steady state UE formula is
UR = s/(s+f)
Steady state UE means
those looking for jobs = those leaving jobs
What two metrics does the Beveridge curve include/why does it shift/why do we move along it
Vacancies and UE/structural reasons/cyclical reasons
**Uncovered interest parity equation is
i − i* = −%Δe
Risk premium formula is
r = r* + θ
Nominal er =
RER*(Pdom/foreign)
Sticky price formula
P = Pe + [(1 − s)a/s](Y − Ybar)
Prices - y equation is
Y = Ybar + α(P − Pe)
Flexible price firms use what SRAS equation
p = P + a(Y - Ybar)
Sticky price firms use which equation
P = Pe
a =
s/(1 − s)a
Phillips curve is relationship between
inverse relationship between inflation and UE/inflation up, UE down
Phillips curve formula =
π = πe− β(u − un) + ν
What π does the fed choose under a fixed rule?
0
What π does the fed choose under a discretionary rule?
a/2y
Taylor Rule:
i = π + p + ½(π - π*) + ½(Y - Ybar)
;