Brief Outline of Topics Covered in Lecture 11
Chapter 20 The IS-LM Model
- The IS curve
- Investment and the interest rate
- Net exports and the interest rate
- Derive the IS curve from 45 degree line diagram
- Shifts in the IS curve
- Slope of IS curve
Video:
Lecture 11 - YouTube
Lecture 11 - Google Video
Additional Reading:
- Super-sizing the IMF is wrong - Kenneth Rogoff
- How severe a slump in China? - Brad Setser
- Trade’s Lubricant Growing Costlier - NYTimes.com
- Obama Has Chance to Make Quick Mark on Fed - Real Time Economics
- Fed Again Raises Rates It Pays on Reserves - Real Time Economics
Application:
Fed Again Raises Rates It Pays on Reserves: The Federal Reserve released the following statement Wednesday.
The Federal Reserve Board on Wednesday announced that it will alter the formulas used to determine the interest rates paid to depository institutions on required reserve balances and excess reserve balances.
Previously, the rate on required reserve balances had been set at the average target federal funds rate established by the Federal Open Market Committee (FOMC) over a reserves maintenance period minus 10 basis points. The rate on excess balances had been set as the lowest federal funds rate target in effect during a reserve maintenance period minus 35 basis points. Under the new formulas, the rate on required reserve balances will be set equal to the average target federal funds rate over the reserve maintenance period. The rate on excess balances will be set equal to the lowest FOMC target rate in effect during the reserve maintenance period. These changes will become effective for the maintenance periods beginning Thursday, November 6.
The Board judged that these changes would help foster trading in the funds market at rates closer to the FOMC’s target federal funds rate.
