Lecture 3.22.18

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Funds
o T: tax revenue
o Tr:: Transfer
o T > Tr + G: surplus
o T < Tr + G: deficit
o Trade deficit: M > X
Q1: 3%+1%=4%
Q2: 4% x $10000= $400
Q3: 4%-5%=-1%
o Amy worse off, borrower better off
Real r = nominal r – I
IF actual i > expected i, the borrower gains and vice versa
Q1: Firms borrow more; Demand goes up; shifts right
Q2: Supply goes down; shifts left
Q3: Supply is up; shifts right
Q4: Borrow less (demand down) and save more (supply up)
Test review
o 26 Mc
o 3 short answer
 One on inflation
 Labor market + aggregate production
 Loanable funds market
o
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