Monetary Policy and Household Decisions

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This lecture covers the optimization problem of a representative consumer maximizing lifetime utility through consumption and work choices, the role of monetary policy in the New Keynesian model, and the impact of price flexibility on firm decisions. It also discusses the Taylor rule, the Swiss National Bank's monetary policy, and the effects of monetary policy shocks on the economy.

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Monetary policy is the policy adopted by the monetary authority of a nation to affect monetary and other financial conditions to accomplish broader objectives like high employment and price stability (normally interpreted as a low and stable rate of inflation). Further purposes of a monetary policy may be to contribute to economic stability or to maintain predictable exchange rates with other currencies.

In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reduction in the purchasing power of money. The opposite of inflation is deflation, a decrease in the general price level of goods and services. The common measure of inflation is the inflation rate, the annualized percentage change in a general price index.

In mathematical logic and type theory, the λ-cube (also written lambda cube) is a framework introduced by Henk Barendregt to investigate the different dimensions in which the calculus of constructions is a generalization of the simply typed λ-calculus. Each dimension of the cube corresponds to a new kind of dependency between terms and types. Here, "dependency" refers to the capacity of a term or type to bind a term or type. The respective dimensions of the λ-cube correspond to: x-axis (): types that can bind terms, corresponding to dependent types.

A typed lambda calculus is a typed formalism that uses the lambda-symbol () to denote anonymous function abstraction. In this context, types are usually objects of a syntactic nature that are assigned to lambda terms; the exact nature of a type depends on the calculus considered (see kinds below). From a certain point of view, typed lambda calculi can be seen as refinements of the untyped lambda calculus, but from another point of view, they can also be considered the more fundamental theory and untyped lambda calculus a special case with only one type.

Lambda calculus (also written as λ-calculus) is a formal system in mathematical logic for expressing computation based on function abstraction and application using variable binding and substitution. It is a universal model of computation that can be used to simulate any Turing machine. It was introduced by the mathematician Alonzo Church in the 1930s as part of his research into the foundations of mathematics. Lambda calculus consists of constructing lambda terms and performing reduction operations on them.