Bahan UTS Makro-1

Bahan Kuliah Sineo Solution >> Makroekonomi-1

Uang dan Inflasi Important Concept

When people want to hold a lot of money for each dollar of income (k is large), money changes hands infrequently (V is small). Conversely, when people want to hold only a little money (k is small), money changes hands frequently (V is large). In other words, the money demand parameter k and the velocity of money V are opposite sides of the same coin. Next we assuming constant Velocity of money. Then the quantity equation becomes a useful theory about the effects of money, called the quantity theory of money. We now have a theory to explain what determines the economys overall level of prices. The theory has three building blocks: The factors of production and the production function determine the level of output Y. The money supply M determines the nominal value of output PY. This conclusion follows from the quantity equation and the assumption that the velocity of money is fixed. The price level P is then the ratio of the nominal value of output PY to the level of output Y.

Free download, log in @http://neorifort.com >> SINEO SOLUTION

Paperless for a better life! Think BIG, Start from Little, and Act NOW!
1

Bahan UTS Makro-1

Bahan Kuliah Sineo Solution >> Makroekonomi-1

In other words, the productive capability of the economy determines real GDP, the quantity of money determines nominal GDP, and the GDP deflator is the ratio of nominal GDP to real GDP.

Thus, the quantity theory of money states that the central bank, which controls the money supply, has ultimate control over the rate of inflation. If the central bank keeps the money supply stable, the price level will be stable. If the central bank increases the money supply rapidly, the price level will rise rapidly. Seignorage
A government can finance its spending in three ways. First, it can raise revenue through taxes, such as personal and corporate income taxes. Second, it can borrow from the public by selling government bonds. Third, it can print money. The revenue raised by the printing of money is called seigniorage. When the government prints money to finance expenditure, it increases the money supply. The increase in the money supply, in turn, causes inflation. Printing money to raise revenue is like imposing an inflation tax. Who, then, pays the inflation tax? The answer is the holders of money. As prices rise, the real value of the money in your wallet falls. Therefore, when the government prints new money for its use, it makes the old money in the hands of the public less valuable. Inflation is like a tax on holding money.

real vs nominal interest rate : clasical dichotomy

Fischer equation / Fischer effects It shows that the nominal interest rate can change for two reasons: because the real interest rate changes or because the inflation rate changes. Fischer effect show the one-on-one relation between inflation rate and nominal interest rate.

The Two kind of real interest rate the real interest rate that the borrower and lender expect when the loan is made, called the ex ante real interest rate, and the real interest rate that is actually realized, called the ex post real interest rate.

Free download, log in @http://neorifort.com >> SINEO SOLUTION

Paperless for a better life! Think BIG, Start from Little, and Act NOW!
2

Bahan UTS Makro-1

Bahan Kuliah Sineo Solution >> Makroekonomi-1

Cost of Holding money

Free download, log in @http://neorifort.com >> SINEO SOLUTION

Paperless for a better life! Think BIG, Start from Little, and Act NOW!
3

Bahan UTS Makro-1

Bahan Kuliah Sineo Solution >> Makroekonomi-1

Hyperinflation : print too much money (inflation bigger than 50%), usually begin with the inadequacy of government to finance his expenditure so he must depend on money printing. This situation get worse and cause hyperinflation.

Unemployment fU sE f U s(L U) that is steady-state of unemployment rate

Free download, log in @http://neorifort.com >> SINEO SOLUTION

Paperless for a better life! Think BIG, Start from Little, and Act NOW!
4

Bahan UTS Makro-1

Bahan Kuliah Sineo Solution >> Makroekonomi-1

Any policy aimed at lowering the natural rate of unemployment must either reduce the rate of job separation or increase the rate of job finding. Similarly, any policy that affects the rate of job separation or job finding also changes the natural rate of unemployment. There are several reason unemployment might exist : One reason for unemployment is that it takes time to match workers and jobs.The unemployment caused by the time it takes workers to search for a job is called frictional unemployment. Some frictional unemployment is inevitable in a changing economy. For many reasons, the types of goods that firms and households demand vary over time. As the demand for goods shifts, so does the demand for the labor that produces those goods. sectoral shift Because sectoral shifts are always occurring, and because it takes time for workers to change sectors, there is always frictional unemployment. As long as the supply and demand for labor among firms is changing, frictional unemployment is unavoidable. A second reason for unemployment is wage rigiditythe failure of wages to adjust to a level at which labor supply equals labor demand. Yet wages are not always flexible. Sometimes the real wage is stuck above the market-clearing level. The unemployment resulting from wage rigidity and job rationing is sometimes called structural unemployment. Workers are unemployed not because they are actively searching for the jobs that best suit their individual skills but because there is a fundamental mismatch between the number of people who want to work and the number of jobs that are available.

Free download, log in @http://neorifort.com >> SINEO SOLUTION

Paperless for a better life! Think BIG, Start from Little, and Act NOW!
5

Bahan UTS Makro-1

Bahan Kuliah Sineo Solution >> Makroekonomi-1

To understand wage rigidity and structural unemployment, we must examine why the labor market does not clear. We now turn to three causes of this wage rigidity: minimum-wage laws, the monopoly power of unions, and efficiency wages. Minimum wage laws (like UMR) Monopoly union : serikat buruh membuat harga menyalahi kaidah equilibrium Wage efficiency : propose that :because a firm operates more efficiently if it pays its workers a high wage, the firm may find it profitable to keep wages above the level that balances supply and demand. The result of this higher-than-equilibrium wage is a lower rate of job finding and greater unemployment.

Free download, log in @http://neorifort.com >> SINEO SOLUTION

Paperless for a better life! Think BIG, Start from Little, and Act NOW!
6