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AVC is at its Minimum
Minimum Supply Price
Fed notes, coins, and banks' reserves deposits at the Fed.Size of
monetary base restricts the total amount of money that can be created.
The addition to total revenue from selling one more unit of output
1) Increases (Decreases) in Expected inflation, Income, Profits,
Foreign incomes and (Decreases) Increases in Domestic exhcange rate.
HIGHER
1) changes in economic environment; 2) Technology; 3) RegulationReduce
demand for money include:1) ATM; 2) Internet Banking; 3) credit card
usages;
Most usedFed buying & selling Treasury Securities.Fed purchases
increases cash for lending, decreases interest rates.Fed sales remove
cash, increasing interest rates
Total Revenue - Total Cost
Considers explicit and implicit costs
1) Interest rates (most critical); 2) Inflation (increases demand for
nominal money); 3) Real GDP growth (increases the demand for nominal and
real money).
LOWER, suppliers will bear a higher burden
Higher inflation -> higher nominal ratesFaster Money Supply (MS) growth -> higher nominal rates
supply of bank reserves
Short run Phillips curve, level of UNemployment is negatively related
to inflation. (think N in unemployment = negatively related) HENCE
employment is positively related to inflation.
the point where AP is at it's maximum
Least usedHigher % decreases money supply & increase interest
rates;Lower % increases money supply & decreases interest rates
Supplier/Seller bears higher burdern
Utilitarianism & Symmetry
positive output = inflationary gap, FED sell securitiesnegative output = recessionary gap, Feds buy securities
Increase in Pe & Qe -> Economic profit -> Firms expand -> New entrants -> LR: zero economic profit
Using the least amount of inputs to produce a given output
Yes. 1) No DWL; 2) No consumer surplus; 3) Same quantity as perfect competition
Monopoly
Marginal Product curve (MP) intersects Average Product curve (AP) @
its max. The Q at which AP = maximum = Q for which AVC is at its
minimum.
Luxury Good
Marginal Benefit to society (Demand) = Marginal Cost for the "last"
unit of each good and service to be produced (Supply). (MC = MB)
Inferior Good
Labor Union: (collective bargaining/ only group of employees) increase
wage rate and reduce employmentMonopsony: (single buyer/employer)
reduce wage rate and employment b/c MC of an add'l worker > wage.
1) Income taxes reduce incentive to work (hence reduce supply of labor
only); 2) Expenditure taxes reduce purchasing power of wages (hence
reduce the real wage rate); 3) Reduce potential GDP
1) Perfectly elastic supply (unskilled labor)- no economic rent; 2)
Perfectly inelastic supply (golf ability)- max economic rent;3) Upward
sloping supply curve -> some economic rent
Price Increase = Revenue DecreaseE > 1 (absolute value) E > I -1 I
1) Kinked demand curve- follow price decrease only;2) Dominant firm oligopoly-dominant firm sets price
The percentage of total industry sales made by the four largest firms
in the industry. A highly competitive industry may have a four-firm
concentration ratio near zero, while the ratio for monopoly is 100%,
< 40% = Competitive Market,>60% is Oiligopy
1) Targeting growth of monetary base (McCallum rule): cycles can still
result from fluctuation in AD; 2) Targeting growth of money supply
(Friedman's k-percent rule): result in fluctuation in AD and velocity;
3) Target the foreign exchange rate: inflation would be that of foreign
countries; 4) Inflation targeting: less flexible, may or may not be
better.
decrease in total surplus due to an inefficient level of production
1) Price Control (ceilings & floors); 2) Taxes and trade
restricitions (subsidies & quotas); 3) Monopoly; 4) External Costs;
5) External Benefit; 6) Public goods and common resources
an increase in the money supply will cause a proportional increase in
price. in other words: growth in money supply in excess of the growth
rate of real GDP is inflationary
(Cost of Basket of Current Prices) / (Cost of Basket at Base Period Prices) x 100
Two goods are reasonable substitutes for each other
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