1980–depository institutions deregulation & monetary control act DIDMCA, 6 year phase out of interest rate ceilings, permitted NOW accounts,  FDIC coverage to $100000 1989 Financial Institutions Reform, Recovery, & Reinforcement Act (FIRREA)–authorized taxpayer funds to cover cost of liquidating failed thrifts, abolished current thrift regulatory structure, moved thrift insurance to FDIC, required insurance fund= 1.25% of insured deposits ABCT–there is no market mechanism that causes inflation or business cycles, the inflation of prices is an effect not a cause of economic disruption ABCT & unsustainable boom–the fed  MS to  interest and employment (I), not been a change in time preferences, the  in interest sends the wrong signal & investment projects start to compete with consumption for resources, may not be noticed (slack resources get used), eventually C & I will have to bid up resource costs, inflation dampens I, so Fed further  MS, effects are only temporary Actual inflation-exceeds inflation expectations, real ex post returns on bonds can be negative AD can shift –  AD, shift right.  AD, shift left. Whenever C, I, G, net x / due to changes in the money supply AD curve holding constant moving down –quantity of money AD for output–derived from the demand for money or from the real balance effect AD slopes downward–when the price level is lowered our money balances grow in real terms leading us to buy more Addressing the business cycle–stop inflating money, don’t bail out troubled firms, don’t inflate to get out of the depression, don’t encourage more consumption Adjusting for risk premiums, i still differs–by maturities, a positive term premium = normal yield curve, a negative term premium = inverted yield curve Adverse Selection – occurs before a transaction takes place, lenders & insurers will attract the worst risks,