Macro - Points to Note 1. What is M0, M1, M2? 2.

Real interest rate in the data, take treasury minus inflation rate (not divide) 3. In a model with money neutrality, a 10% increase in money supply does not lead to an output increase. It will only lead to a 10% increase in prices. 4. Disruptions in the banking system increases money demand while introduction of online banking decreases money demand. 5. The Solow residual attempts to measure the amount of output not explained by the direct contribution of labour and capital. 6. The Friedman rule is a monetary policy rule proposed by Milton Friedman. Essentially, Friedman advocated setting the nominal interest rate at zero. According to the logic of the Friedman rule, the opportunity cost of holding money faced by private agents should equal the social cost of creating additional fiat money. It is assumed that the marginal cost of creating additional money is zero (or approximated by zero). Therefore, nominal rates of interest should be zero. In practice, this means that the central bank should seek a rate of deflation equal to the real interest rate on government bonds and other safe assets, to make the nominal interest rate zero. 7. Remember how to calculate GDP deflator for different base years. If base year is year 2, then GDP is 100% in year 2. 8. A competitive equilibrium is a state of affairs in which agents are price takers and markets are clear. 9. Pareto optimum does not require MPN to be = w 10. The gold standard is an example of representative money. 11. A model in which some goods must be purchased with cash on hand is called a cash in advance model. 12. Remember the Ricardian equivalence, taxes through time has no impact. 13. Remember the relationship between Kgr and Sgr. Re-read lender and borrower relationship when the rate of lending and borrowing differs. Is tax cut a free lunch? 14. Know that r+i=R