Chapter 10 Aggregate Demand I
|
|
- Elvin Butler
- 6 years ago
- Views:
Transcription
1 Chapte 0 Aggegate Demand I CHATR 0 0 CHATR 0 Leaning Objectives Chapte 9 intoduced the model of aggegate demand and aggegate supply. Long un (Classical Theoy) pices flexible output detemined by factos of poduction & technology unemployment equals its natual ate Shot un (Keynes) pices fixed output detemined by aggegate demand unemployment is negatively elated to output CHATR 0 2 Leaning Objectives This chapte develops the -LM model (Hicks), the theoy that yields the aggegate demand cuve. We focus on the shot un and assume the pice level is fixed. CHATR 0 3 Keynesian Coss Theoy of Liquidity efeence The Big ictue cuve LM cuve -LM model Agg. demand cuve Agg. supply cuve Model of Agg. Demand and Agg. Supply xplanation of shot-un fluctuations CHATR 0 4. The Cuve. The Keynesian Coss A simple closed economy model in which income is detemined by expenditue. (due to Keynes) Notation: C + I + G planned expenditue eal GD actual expenditue Diffeence between actual & planned expenditue: unplanned inventoy investment CHATR 0 5
2 . The Keynesian Coss consumption function: govt policy vaiables: fo now, investment is exogenous: planned expenditue: quilibium condition: Actual expenditue C C ( T ) G G, T T I I C ( T ) + I + G lanned expenditue CHATR 0 6. The Keynesian Coss lanned xpenditue planned expenditue MC C +I +G income, output, CHATR 0 7. The Keynesian Coss quilibium Condition planned expenditue. The Keynesian Coss planned expenditue C +I +G 45º income, output, CHATR 0 8 quilibium income income, output, CHATR 0 9. The Keynesian Coss An incease in govenment puchases At, thee is now an unplanned dop in inventoy so fims incease output, and income ises towad a new equilibium G C +I +G 2 C +I +G 2 2. The Keynesian Coss An incease in govenment puchases C + I + G C + I + G C + G MC + G Collect tems with on the left side of the equals sign: ( MC) G equilibium condition in changes because I exogenous b.c. C MC ( - T) Finally, solve fo : G MC CHATR 0 0 CHATR 0 2
3 . The Keynesian Coss The govenment puchases multiplie Definition: the incease in income esulting fom a unit incease in G. In this model, the G multiplie equals G MC CHATR 0 2. The Keynesian Coss The govenment puchases multiplie xample: MC 0.8 G MC G G 5 G The incease in G causes income to incease by 5 times as much! G 0. 8 CHATR The Keynesian Coss The govenment puchases multiplie Why is the multiplie geate than? Initially, the incease in G causes an equal incease in : G. But C futhe futhe C futhe So the final impact on income is much bigge than the initial G. CHATR 0 4. The Keynesian Coss An incease in taxes Initially, the tax incease educes consumption, and theefoe : C MC T so fims educe output, and income falls towad a new equilibium 2 2 C +I +G C 2 +I +G At, thee is now an unplanned inventoy buildup CHATR 0 5. The Keynesian Coss An incease in taxes C + I + G C MC ( T ) Solving fo : Final esult: eq m condition in changes I and G exogenous ( MC) MC T MC T MC. The Keynesian Coss The tax multiplie Definition: the change in income esulting fom a unit incease in T : T MC MC If MC 0.8, then the tax multiplie equals T CHATR 0 6 CHATR 0 7 3
4 . The Keynesian Coss The tax multiplie is negative: An incease in taxes educes consume spending, which educes equilibium income. is geate than one (in absolute value): A change in taxes has a multiplie effect on income. is smalle than the govt spending multiplie: Consumes save the faction (-MC) of a tax cut, so the initial boost in spending fom a tax cut is smalle than fom an equal incease in G. CHATR Defining and Deiving the Cuve.2. Using Keynesian Coss and Investment Function Definition: a gaph of all combinations of and that esult in goods maket equilibium, i.e. actual expenditue (output) planned expenditue The equation fo the cuve is: C ( T ) + I ( ) + G CHATR Defining and Deiving the Cuve.2. Using Keynesian Coss and Investment Function C +I( 2 )+G I C +I( )+G I 2.2 Defining and Deiving the Cuve.2.2 Using Loanable Funds Appoach 2 (a) The L.F. model S 2 S 2 (b) The cuve 2 2 I( ) S, I 2 CHATR 0 20 CHATR Defining and Deiving the Cuve The cuve is negatively sloped. Intuition: A fall in the inteest ate motivates fims to incease investment spending, which dives up total planned spending ( ). To estoe equilibium in the goods maket, output (a.k.a. actual expenditue, ) must incease..3 Fiscal olicy and the Cuve We can use the -LM model to see how fiscal policy (G and T ) can affect aggegate demand and output. Let s stat by using the Keynesian Coss to see how fiscal policy shifts the cuve CHATR 0 22 CHATR
5 .3 Fiscal olicy and the Cuve At any value of, G so the cuve shifts to the ight. The hoizontal distance of the shift equals G MC C +I( )+G C +I( )+G CHATR The LM Cuve 2. The Theoy of Liquidity efeence A simple theoy in which the inteest ate is detemined by money supply and money demand. (due to Keynes again) CHATR The Theoy of Liquidity efeence 2. The Theoy of Liquidity efeence The supply of eal money is fixed: ( M ) s M inteest ate ( M ) s Demand fo eal money : d ( M ) L( ) inteest ate ( M ) s L() M eal money M eal money CHATR 0 26 CHATR The Theoy of Liquidity efeence The inteest ate adjusts to equate the supply and demand fo money: M L( ) inteest ate ( M ) s L() 2. The Theoy of Liquidity efeence A change in money supply To incease, Fed educes M inteest ate 2 L() M eal money M 2 M eal money CHATR 0 28 CHATR
6 2.2 Defining and Deiving the LM Cuve 2.2. Using Theoy of Liquidity efeence Now let s put back into the money demand function: L(, ) ( M ) d 2.2 Defining and Deiving the LM Cuve 2.2. Using Theoy of Liquidity efeence (a) The maket fo (b) The LM cuve eal money LM The LM cuve is a gaph of all combinations of and that equate the supply and demand fo eal money. The equation fo the LM cuve is: M L(, ) 2 M L(, 2 ) L(, ) 2 2 CHATR 0 30 CHATR Defining and Deiving the LM Cuve Using Quantity quation Quantity quation MV Quantity Theoy of money assumes constant velocity vetical LM cuve If we adjust it so that VV() then we get the upwad sloping LM cuve again. 2.2 Defining and Deiving the LM Cuve The LM cuve is positively sloped. Intuition: An incease in income aises money demand. Since the supply of eal is fixed, thee is now excess demand in the money maket at the initial inteest ate. The inteest ate must ise to estoe equilibium in the money maket. CHATR 0 32 CHATR Monetay olicy and the LM Cuve 2 (a) The maket fo eal money M 2 M L(, ) (b) The LM cuve 2 LM LM 2 CHATR The shot-un equilibium The shot-un equilibium is the combination of and that simultaneously satisfies the equilibium conditions in the goods & money makets: C ( T ) + I ( ) + G M L(, ) quilibium inteest ate LM quilibium level of income CHATR
7 Chapte summay. Keynesian Coss basic model of income detemination takes fiscal policy & investment as exogenous fiscal policy has a multiplied impact on income. 2. cuve comes fom Keynesian Coss when planned investment depends negatively on inteest ate shows all combinations of and that equate planned expenditue with actual expenditue on goods & sevices CHATR 0 36 Chapte summay 3. Theoy of Liquidity efeence basic model of inteest ate detemination takes money supply & pice level as exogenous an incease in the money supply lowes the inteest ate 4. LM cuve comes fom Liquidity efeence Theoy when money demand depends positively on income shows all combinations of and that equate demand fo eal money with supply CHATR 0 37 Chapte summay 5. -LM model Intesection of and LM cuves shows the unique point (, ) that satisfies equilibium in both the goods and money makets. eview of Chapte In Chapte, we will use the -LM model to analyze the impact of policies and shocks lean how the aggegate demand cuve comes fom -LM use the -LM and AD-AS models togethe to analyze the shot-un and longun effects of shocks lean about the Geat Depession using ou models CHATR 0 38 CHATR
Chapter 10 Aggregate Demand I
Chapte 10 Aggegate Demand I CHAPTER 10 0 CHAPTER 10 1 Leaning Objectives Chapte 9 intoduced the model of aggegate demand and aggegate supply. Long un (Classical Theoy) pices flexible output detemined by
More information2014/6/17. Context. Context. Elements of the Keynesian Cross. The Keynesian Cross. Graphing the equilibrium condition. Graphing planned expenditure
Context Long un pices flexible output detemined by factos of poduction & technology unemployment equals its natual ate Shot un pices fixed output detemined by aggegate demand unemployment negatively elated
More informationContext. Context. Chapter 10. Aggregate Demand I. The Big Picture
Chapte 10. Aggegate Demand I Context Chapte 9 intoduced the model of aggegate demand and aggegate supply. Long un pices flexible output detemined by factos of poduction & technology unemployment equals
More informationCHAPTER TEN Aggregate Demand I
CHAPTER TEN Aggegate Demand I 1 The Geat Depession (1929-33) caused many economists to question the validity of classical economic theoy 1936: John Maynad Keynes wote The Geneal Theoy of Employment, Inteest
More informationCHAPTER ELEVEN Aggregate Demand II
HTER ELEVEN ggegate Demand II 1 -LM The intesection of the cuve and the LM cuve detemines the level of national income. When one of these cuves shifts, the shot-un equilibium of the economy changes, and
More informationQuestions for Review. L (r) CHAPTER 10 Aggregate Demand I
4 CHAPTER 0 Aggegate Demand Questions fo Review. The Keynesian coss tells us that fiscal policy has a multiplied effect on income. The eason is that accoding to the consumption function, highe income causes
More informationLecture 12: Aggregate Demand (chapter 11)
Lectue : Aggegate Demand (chapte ) Lectue notes: 0/05 (evised /8/00) topics: -LM AD Long un vesus shot un Geat Depession ) -LM Recall two makets: : Equilibium in goods maket: planned expenditue equals
More informationChapter 12/11 Part 1. Aggregate Demand II: Applying the IS-LM Model 10/28/2017. Equilibrium in the IS -LM model IN THIS CHAPTER WE: M P L( r, Y )
Chapte 12/11 at 1 Aggegate Demand II: Applying the -LM Model IN TH CHATER WE: use the -LM model to analyze the effects of shocks, fiscal policy, monetay policy affect income and the inteest ate in the
More informationChapter 10 Aggregate Demand I CHAPTER 10 0
Chapter 10 Aggregate Demand I CHAPTER 10 0 1 CHAPTER 10 1 2 Learning Objectives Chapter 9 introduced the model of aggregate demand and aggregate supply. Long run (Classical Theory) prices flexible output
More informationMankiw Chapter 12. Aggregate Demand II. Applying the IS-LM Model
Mankiw Chapte 12 Applying the IS-LM Model 0 Context Chapte 10 intoduced the model of aggegate demand and supply. Chapte 11 developed the IS-LM model, the basis of the aggegate demand cuve. 1 IN THIS CHAPTER,
More informationAD continued (Ch.11) An increase in G. Policy analysis with the IS-LM. Model
AD continued (Ch.11 Use the IS-LM model to see how policies and shocks affect income and the inteest ate in the shot un when pices ae fixed deive the aggegate demand cuve exploe vaious explanations fo
More informationMACROECONOMICS. Applying the IS -LM Model MANKIW. Context. In this chapter, you will learn N. GREGORY. Equilibrium in the IS -LM model
C H A T E R 11 Aggegate Demand II: Applying the - Model Context Chapte 9 intoduced the model of aggegate demand and supply. Chapte 10 developed the - model, the basis of the aggegate demand cuve. MACROECONOMICS
More informationChapter 12/11. Aggregate Demand II: Applying the IS-LM Model Part 2 11/7/2017. The Great Depression. Real Side of Economy. Unemployment (right scale)
billions of 1958 dollas pecent of labo foce 11/7/2017 Chapte 12/11 ggegate Demand II: pplying the IS- Model Pat 2 The Geat Depession 240 220 200 180 Unemployment (ight scale) 30 25 20 15 160 140 Real GNP
More informationNotes on Chapter 4. Loanable Funds and the Real Interest Rate. ECON 141: Macroeconomics Loanable Funds Dr. Mohammed Alwosabi
Notes on Chapte 4 Loanable Funds and the Real Inteest Rate 1 Potential GDP depends on the quantity of poductive esouces. Thus, the gowth ate of PGDP depends on how apidly the esouces gow. One of the majo
More informationChapter 9. Chapter 9. Introduction. Figure 9.1 The FE line. The FE Line. FE Curve Shifts. Deriving the IS Curve
Chapte 9. ntoduction Chapte 9 The -LM/AD-A Model: A Geneal Famewok fo Macoeconomic Analysis This chapte integates the elements of ou model that wee sepaately pesented in chaptes 3,4, and 7, coveing labo,
More informationPP556. Topics to cover. Policy Goals in the Short Run: Applying the IS-LM Model. Crowding Out. Equilibrium in the IS-LM model
556 olicy Goals in the Shot Run: Applying the - Model Topics to cove how to use the - model to analyze the effects of shocks, fiscal policy, and monetay policy how to deive the aggegate demand cuve fom
More informationA Short-Run Model of the Large Open Economy
APPENDIX A Shot-Run Model of the Lage Open Economy When analyzing policies in an economy such as that of the United States, we need to combine the closed-economy logic of the IS LM model and the smallopen-economy
More informationHomework #4 The IS-LM Model Due March 18
Page 1 of 11 Homewok #4 The IS-LM Model Due Mach 18 1. Fun with the Keynesian Coss: a. Use the geomety of the Keynesian Coss diagam shown at the ight to deive that the govenment puchases multiplie is 1/(1
More informationChapter 11 Aggregate Demand I: Building the IS -LM Model
Chapter 11 Aggregate Demand I: Building the IS -LM Model Modified by Yun Wang Eco 3203 Intermediate Macroeconomics Florida International University Summer 2017 2016 Worth Publishers, all rights reserved
More informationmacro macroeconomics Aggregate Demand I N. Gregory Mankiw CHAPTER TEN PowerPoint Slides by Ron Cronovich fifth edition
macro CHAPTER TEN Aggregate Demand I macroeconomics fifth edition N. Gregory Mankiw PowerPoint Slides by Ron Cronovich 2002 Worth Publishers, all rights reserved In this chapter you will learn the IS curve,
More informationChapter 10 Aggregate Demand I
Chapter 10 In this chapter, We focus on the short run, and temporarily set aside the question of whether the economy has the resources to produce the output demanded. We examine the determination of r
More informationMACROECONOMICS. Aggregate Demand I: Building the IS-LM Model. N. Gregory Mankiw. PowerPoint Slides by Ron Cronovich
11 : Building the IS-LM Model MACROECONOMICS N. Gregory Mankiw PowerPoint Slides by Ron Cronovich 2013 Worth Publishers, all rights reserved IN THIS CHAPTER, YOU WILL LEARN: the IS curve and its relation
More information1. (20 points) Your task in this problem is to construct national product and income accounts...
Economics 54a, Sping 2005 Intemediate Macoeconomics MIDTERM EXAMINATION: Answe Key. (20 s) You task in this poblem is to constuct national poduct and income accounts... ANSWER:Table shows how to calculate
More informationA Macroeconomic Theory of the Open Economy
Wojciech Geson (1831-1901) Seventh dition Pinciples of Macoeconomics N. Gegoy Mankiw CHAPTR 19 A Macoeconomic Theoy of the Open conomy The Maket fo Loanable Funds An identity fom the peceding chapte: Saving
More informationmacro Aggregate Demand Roadmap to this lecture Equilibrium in the IS-LM Model Model An increase in government purchases A tax cut
Roadmap to this lectue maco Aggegate Demand Stabilization olicy: Monetay olicy Fiscal olicy Inteaction Deiving the AD cuve fom the - slide 1 Equilibium in the - Model olicy analysis with the - Model The
More informationCONSUMPTION-SAVINGS MODEL (CONTINUED) OCTOBER 5, 2009 CONSUMER OPTIMIZATION. u c c π. The Graphics of the Consumption-Savings Model
CONSUMPTION-SAVINGS MODEL (CONTINUED) OCTOBER 5, 2009 The Gaphics of the Consumption-Savings Model CONSUMER OPTIMIZATION Consume s decision poblem: maximize lifetime utility subject to lifetime budget
More informationEquilibrium and Shocks
Equilibium and Shocks We ae now in a position to put the demand and supply sides of the model togethe. This will yield fo us the equilibium pice level, level of output, and eal inteest ate. The equilibium
More informationNational Income & Business Cycles
National Income & Business Cycles Two case studies: Objectives 1. Oil shocks of the 1970s Ohio Wesleyan Univesity Goan Skosples 2. The Geat Depession 10. Oil Shocks of the 1970s and the Geat Depession
More informationProblem Set 7 ID s The Effects of Government Borrowing
staple tagets Staple Me o lose 1 point. Intoduction to Macoeconomics IDs 8000-8999 oblem Set 7 ID s 8000-8999 The Effects of Govenment Boowing Closed Economy, No Foeign Secto, Savings Responds to the Inteest
More informationMacroeonomics. 19 this chapter, A Macroeconomic Theory of the Open Economy. look for the answers to these questions: The Market for Loanable Funds
C H A P T E R In 19 this chapte, look fo the answes to these questions: A Macoeconomic Theoy of the Open Economy P R I N C I P L E S O F Macoeonomics N. Gegoy Mankiw Pemium PowePoint Slides by Ron Conovich
More informationProblem Set 12: The Effects of Government Borrowing Open Economy, Savings Responds to the Interest Rate
Eco 30233 Intemediate Macoeconomics John Lovett oblem Set 12: The Effects of Govenment Boowing Open Economy, Savings Responds to the Inteest Rate Oveview: In this poblem set, you will investigate how changes
More informationOnly an outline of the Dornbusch analysis, along with some
Sahoko KAJI --- Open Economy Macoeconomics Lectue Notes IV The M-F Result unde Fixed Exchange Rates In showing how the M-F esults come about, the logic that we used stated with detemining, both unde flexible
More informationQuestions for Review. CHAPTER 5 The Open Economy
Questions fo Review 1. By ewiting the national income accounts identity, we show in the text that I =. This fom of the national income accounts identity shows the elationship between the intenational flow
More informationSIMPLE MODEL OF CLOSED ECONOMY
SIMPLE MODEL OF CLOSED ECONOMY WITH THE PRESENCE OF RICRDIN EQUIVLENCE (Sticky Pices, Flexible Wages, Competitive Labo Maket) Pepaed fo Econ 296s Poject Tevy Chawwa ditya Rachmanto DUKE UNIVERSITY SPRING
More informationPrinciples of Macroeconomics. Problem Set 2
Pinciples of Macoeconomics Poblem Set 2 Sheif Khalifa 1. (a) If the Fedeal Reseve detemines the eseve atio to be 7%, and then buys bonds fom the public woth $250 million: Money Multiplie= (b) If the Fedeal
More informationProblem Set 11: The Effects of Changes in the Savings Rate Open Economy, Savings Responds to the Interest Rate
Eco 30233 Intemediate Macoeconomics John Lovett oblem Set 11: The Effects of Changes in the Savings Rate Open Economy, Savings Responds to the Inteest Rate Oveview: In this poblem set, you will investigate
More informationTHE TWO-PERIOD FRAMEWORK (CONTINUED)
GOVERNMENT AND FISCAL POLICY IN THE TWO-PERIOD FRAMEWORK (CONTINUED) SEPTEMBER 30, 2014 Govenment in the Two-Peiod Model ADYNAMIC MODEL OF THE GOVERNMENT So fa only consumes in ou two-peiod famewok Intoduce
More information9. ISLM model. Introduction to Economic Fluctuations CHAPTER 9. slide 0
9. ISLM model slide 0 In this lecture, you will learn an introduction to business cycle and aggregate demand the IS curve, and its relation to the Keynesian cross the loanable funds model the LM curve,
More informationand Where It Goes Questions for Review CHAPTER 3 National Income: Where It Comes From
CHAPTER 3 National Income: Whee It Comes Fom and Whee It Goes Questions fo Review. The factos of poduction and the poduction technology detemine the amount of output an economy can poduce. The factos of
More informationCosts. March 23, 2004
Costs Mach 23, 2004 1 Economic pofits and cost minimization 1.1 Costs Assume that inputs ae hied in pefectly competitive makets. Fims can hie all the capital o labo they want at the cuent ates; how much
More informationProblem Set #5 ANSWERS. Due Tuesday, April 29, 2008
Name: SID: Discussion Section: Poblem Set #5 ANSWERS Due Tuesday, Apil 29, 2008 Poblem Sets MUST be wod-pocessed except fo gaphs and equations. When dawing diagams, the following ules apply: 1. Completely,
More informationSurvey of Math Chapter 23: The Economics of Resources Page 1
Chapte 23: The Economics of Resouces Page 1 Intoduction Populations gow and decease ove time, and thee ae diffeent mathematical models fo this. Some common models ae the following thee ae many othes! Aithmetic
More informationContext. Context. Aggregate Demand I slide 2
Context Chapter 9 introduced the model of aggregate demand and aggregate supply. Long run prices flexible output determined by factors of production & technology unemployment equals its natural rate Short
More informationMacroeconomics for Development Week 4 Class
MSc in Economics fo Development Macoeconomics fo Development Week 4 Class Sam Wills Depatment of Economics, Univesity of Oxfod samuel.wills@economics.ox.ac.uk Consultation hous: Fiday, 2-3pm, Weeks 1,3-8
More informationMidterm Exam - Answer Key
Pofesso Salye, Economics 37, Fall 00 Midtem Exam - Answe Key Diections: Answe all questions; the questions ae weighted equally Fo full cedit, you must povide complete explanations fo you answes Geece is
More informationP e. 1 + i t (1 + i t ) This year. Next year. Goods 1 good (1 1 r t. Definition of. goods. the real rate: ) 5 (1 1 i t ) P t. (1 1 i t.
i t t t t + i t ( + i t ( + i t P t P e t+ This yea Next yea Definition of the eal ate: Goods good ( t goods ( t 5 ( i t P t P e t Deivation of the eal ate: Goods ( i good t P t goods P e t P t dollas
More informationEconomics N. Gregory Mankiw. A Macroeconomic Theory of the Open Economy. Introduction. In this chapter, look for the answers to these questions
Seventh Edition Pinciples of Economics N. Gegoy Mankiw CHAPTER 32 A Macoeconomic Theoy of the Open Economy In this chapte, look fo the answes to these questions In an open economy, what detemines the eal
More informationHow do I work Problem Sets 6 and 7?
Fist: Know the assumptions How do I wok Poblem ets 6 and 7? 1) The time peiod is long enough that the economy has enough time fo all of its makets to go to euilibium. The labo maket goes to euilibium.
More informationProblem Set 4 The Effects of Government Borrowing Closed Economy, No Foreign Sector, Savings Responds to the Interest Rate
Eco 30233 Intemediate Macoeconomics John Lovett oblem Set 4 The Effects of Govenment Boowing Closed Economy, No Foeign Secto, Savings Responds to the Inteest Rate Oveview: In this poblem set, you will
More informationGOVERNMENT AND FISCAL POLICY IN THE CONSUMPTION-SAVINGS MODEL SEPTEMBER
GOVERNMENT AND FISCAL POLICY IN THE CONSUMPTION-SAVINGS MODEL SEPTEMBER 23, 200 A Govenment in the Two-Peiod Model So fa only consumes in ou two-peiod wold Intoduce govenment in vey simple fom Exists fo
More informationChapter 5: Interest Rates
Chapte 5: Inteest Rates -1 Chapte 5: Inteest Rates Note: Read the chapte then look at the following. Fundamental questions: 1) How do we handle non-annual cash flows and inteest ates? ) What factos affect
More informationMidterm Exam #2 - Answers. November 24, 1997
age 1 of 5 Name: Novembe 24, 1997 Instuctions: Answe all questions diectly on these sheets. oints fo the pats of each question ae indicated, and thee ae 84 points total. Budget you time. 1. [14 oints]he
More informationGOVERNMENT AND FISCAL POLICY IN FEBRUARY 16, 2011 THE CONSUMPTION-SAVINGS MODEL ADYNAMIC MODEL OF THE GOVERNMENT. A Government in the Two-Period Model
GOVERNMENT AND FISCAL POLICY IN THE CONSUMPTION-SAVINGS MODEL FEBRUARY 6, 20 A Govenment in the Two-Peiod Model ADYNAMIC MODEL OF THE GOVERNMENT So fa only consumes in ou two-peiod famewok Intoduce govenment
More informationGOVERNMENT AND FISCAL POLICY IN THE CONSUMPTION-SAVINGS MODEL SEPTEMBER
GOVERNMENT AND FISCAL POLICY IN THE CONSUMPTION-SAVINGS MODEL SEPTEMBER 26, 2013 A Govenment in the Two-Peiod Model ADYNAMIC MODEL OF THE GOVERNMENT So fa only consumes in ou two-peiod famewok Intoduce
More informationECON 3560/5040 Week 8-9
ECON 3560/5040 Week 8-9 AGGREGATE DEMAND 1. Keynes s Theory - John Maynard Keynes (1936) criticized classical theory for assuming that AS alone capital, labor, and technology determines national income
More informationEcon 422 Eric Zivot Fall 2005 Midterm Exam Solutions. I. Intertemporal Consumption and Investment Decisions (25 points, 5 points each)
Econ 422 Eic Zivot Fall 2005 Midtem Exam Solutions his is a closed book exam. Howeve, you ae allowed one page of notes (double-sided). Answe all questions. Fo the numeical poblems, if you make a computational
More informationEconomics 11. Caltech Spring Problem Set 3
Economics Caltech Sping 200 Poblem Set Homewok Policy: Study You can study the homewok on you own o with a goup of fellow students. You should feel fee to consult notes, text books and so foth. The quiz
More informationThe use of the Forstlicher Zinssatz * as an approximation approach in an uncertain world
Meeting of the IUFRO, Octobe 8, Damstadt 9 The use of the Fostliche Zinssatz * as an appoximation appoach in an uncetain wold - a eal options pespective - of. D. Thomas Bukhadt * taditional inteest ate
More informationHow Monetary Policy Works. Aggregate Demand and Potential Output. Inflation and Unemployment Zones
How Monetay Policy Woks Final xam Facts How is the Fedeal Reseve Stuctued? What ae the goals of U.S. monetay policy? What ae the tools of U.S. monetay policy? Why does changing the Fed Funds ate affect
More informationpays no interest per $ r LT r ST per $
IS-LM analysis assumes thee is only one inteest Standad. his is vey unealistic. In the eal wold thee ate many inteest ates, depending on the how long you lend ae money and at what isk of default. o undestand
More informationProblem Set 2 FE312 Fall 2011 Rahman. Some Answers
Poblem et 2 ome Anses 1) Use the neoclassical theoy of distibution to pedict the impact on the eal age and the eal ental pice of capital of each of the folloing events (illustate gaphically, using to gaphs
More informationFinal Exam 5/9/17. Problem Number Points
Final Exam 5/9/17 Economics 108 Landsbug NAME: Thee ae 12 poblems, with the following point values: Total Points: 202 Poblem Numbe Points 1 14 2 24 3 18 4 9 5 23 6 15 7 20 8 12 9 16 10 12 11 24 12 15 1
More informationAssignment #4 Answers ECON 100A: Intermediate Macroeconomic Theory. DUE DATE: Monday, July 7 th Prof. Van Gaasbeck Summer 2008
alifonia State Univesity Sacamento ssignment #4 nswes EON 100: Intemediate Macoeconomic Theoy DUE DTE: Monday, Jly 7 th Pof. Van Gaasbeck Smme 2008 1. IS/MP/I in the Open Economy a) MP shifts downwad &
More information1. A large number of economic statistics are released regularly. These include the following:
CHAPTER 2 The Data of Macoeconomics Questions fo Review 1. GDP measues both the total income of eveyone in the economy and the total expenditue on the economy s output of goods and sevices. GDP can measue
More informationStock Buybacks and Earnings Per Share
tock Buybacks and anings e hae Macelle Aak Many textbooks give the misleading impession that stock buybacks always incease eanings pe shae. They always do incease opeating pofits pe shae. Howeve, stock
More informationAGGREGATE DEMAND. 1. Keynes s Theory
AGGREGATE DEMAND 1. Keynes s Theory - John Maynard Keynes (1936) criticized classical theory for assuming that AS alone capital, labor, and technology determines national income proposed that low AD is
More informationLecture 32: Impulse and Cross Sections
Lectue 3: Impulse and Coss Sections Even though we may not know what foces act duing a collision, we can detemine something about those foces fom Newton s Second Law Duing the collision: d( mv) F p dt
More informationThe Demand for Money and the Term Structure of Interest Rates in Ireland,
The Economic and Social Review, Vol. 16, No. 2, Januay, 1985, pp. 157-166 The Demand fo Money and the Tem Stuctue of Inteest Rates in Ieland, 1971-1981 LM KEARNEY Univesity of Loughboough, Loughboough
More informationMacroeconomics 1 Lecture 11: ASAD model
Macroeconomics 1 Lecture 11: ASAD model Dr Gabriela Grotkowska Lecture objectives difference between short run & long run aggregate demand aggregate supply in the short run & long run see how model of
More informationA Kind of Neither Keynesian Nor Neoclassical Model (4): The Nature of Philips Curve
Open Access Libay Jounal 2017, Volume 4, e3388 ISSN Online: 2333-9721 ISSN Pint: 2333-9705 A Kind of Neithe Keynesian No Neoclassical Model (4): The Natue of Philips Cuve Zhan Zhan 1, Mingan Zhan 2 1 Westa
More informationLesson III: Overview. 1. The relationship between spot, forward and. 2. How to construct synthetic securities
Lesson III: Oveview 1. The elationship between spot, fowad and money maket ates 2. How to constuct synthetic secuities 1 The elationship between spot, fowad and money ates 2 pot, wd & MM Rates MM Rate
More informationINTEREST RATES, RISK, AND IMPERFECT MARKETS: PUZZLES AND POLICIES
INTEREST RATES, RISK, AND IMPERFECT MARKETS: PUZZLES AND POLICIES JOSEPH E. STIGLITZ The Wold Bank 1 Taditional theoy emphasizes the key ole that monetay policy can play though the manipulation of inteest
More informationOutline of model. The supply side The production function Y = F (K, L) A closed economy, market-clearing model
CHAPTER THREE National Income: Where it Comes From and Where it Goes what what determines the the economy s total total output/income how how the the prices prices of of the the factors factors of of production
More informationMath 1050 Mortgage Project
Math 1050 Motgage Poject Name Due date: In this poject we will examine a home loan o motgage. Assume that you have found a home fo sale and have ageed to a puchase pice of $201,000. Down Payment: You ae
More informationReal GDP Growth in the United States Introduction to Economic Fluctuations slide 2.
Real GD Growth in the United States 10 ercent change from 4 quarters 8 earlier Average growth rate = 3.5% 6 4 2 0-2 -4 1960 1965 1970 1975 1980 1985 1990 1995 2000 Introduction to Economic Fluctuations
More informationDeficit Reductions & Multiplier Effects on Economy
Deficit Reductions & Multiplie Effects on Economy Regading the Automatic Budget Enfocement Pocedues Edited Vesion Authoed by Xue Han Januay 2012 Table of Contents Executive Summay...1 Economic and Political
More informationIS-LM model. Giovanni Di Bartolomeo Macro refresh course Economics PhD 2012/13
IS-LM model Giovanni Di Bartolomeo giovanni.dibartolomeo@uniroma.it Note: These leture notes are inomplete without having attended letures IS Curve Giovanni Di Bartolomeo giovanni.dibartolomeo@uniroma.it
More informationEconomic Policy and Special Topics: Real-World Applications of the Model
Economic olicy and Special Topics: Real-Wold Applications of the Model Topic 8 Goals of Topic 8 utting ou model at wok. Go though seveal eal-wold applications: ) Analysis of aticles fom the Economist though
More informationCOMPOUND INTEREST (30 August 2003)
COMPOUND INTEREST 30 August 2003 We note the mateial used in this section is patially based on the efeence book: EF Haeussle and RS Paul Intoductoy Mathematical Analysis fo Business, Economics and the
More informationFixed-Rate Mortgages
Fixed-Rate Motgages 1 A Motivating Example We begin with a motivating example. Example 1. Smith takes out a 5-y fixed ate motgage fo 10,000 at a loan inteest ate of 10% (compounded annually). Smith makes
More informationFinancial Profile Questionnaire
Financial Pofile Questionnaie This compehensive, pesonal financial summay is designed to help you take inventoy and assign ealistic values to you pesonal assets and liabilities. It is the essential fist
More informationForeign. Home MPL MPL H L F F L
ǰ ǰ Economics 诲诲 睹睻 睻 of Euopean Integation Pactice Session 5: Solutions to poblem set ee mobility of Poduction s factos . ee mobility of abo. a. Equilibium in absence of abo mobility i ii D D S S mcc..
More informationNOT FOR DISTRIBUTION. 6 Alternative models of growth and distribution with a simple formulation of endogenous technological change
6 Altenative models of owth and distibution with a simple fomulation of endoenous technoloical chane Intoduction Amitava Kishna Dutt hee have been a numbe of attempts to show how altenative models of economic
More informationEconomic policy and special topics: Real-world applications of the model
Economic policy and special topics: Real-wold applications of the model Topic 8 Macoeconomics 39 - Lectue 8 Goals of Topic 8 utting ou model at wok. Go though seveal eal-wold applications: ) Analysis of
More informationClass 5. The IS-LM model and Aggregate Demand
Class 5. The IS-LM model and Aggregate Demand 1. Use the Keynesian cross to predict the impact of: a) An increase in government purchases. b) An increase in taxes. c) An equal increase in government purchases
More informationSolutions to TVM Practice Set II
Solutions to TVM Pactice Set II. In this poblem you ae solving fo the monthly ate of etun and then the yealy ate of etun. Thee ae 228 months in 9 yeas (9 * 2 = 228). $3,438 228 a) To detemine the monthly
More informationChapter 9 Introduction to Economic Fluctuations
Chapter 9 Introduction to Economic Fluctuations facts about the business cycle how the short run differs from the long run an introduction to aggregate demand an introduction to aggregate supply in the
More informationMonetary Macroeconomics Lecture 3. Mark Hayes
Diploma Macro Paper 2 Monetary Macroeconomics Lecture 3 Aggregate demand: Investment and the IS-LM model Mark Hayes slide 1 Outline Introduction Map of the AD-AS model This lecture, continue explaining
More informationDetermination of the WACC in the Setting of a 5 year Regulatory Cycle Bruce D. Grundy 17 February, 2011
Detemination of the WACC in the Setting of a 5 yea Regulatoy Cycle Buce D. Gundy 17 Febuay, 2011 This analysis answes the question of the appopiate tem fo the isk-fee ate, the debt magin and equity isk
More informationMACROECONOMICS. N. Gregory Mankiw. Introduction to Economic Fluctuations 8/15/2011. In this chapter, you will learn: Facts about the business cycle
1 U D T E S E V E N T H E D I T I O N /15/11 MCROECONOMICS N. Gregory Mankiw oweroint Slides by Ron Cronovich C H T E R 9 Introduction to Economic Fluctuations In this chapter, you will learn: facts about
More informationFinal exam. Friday, August hours
San Fancisco State Univesity Michael Ba ECON Summe 3 Final exam Fiday, ugust 6 hous Name: Instuctions. This is closed book, closed notes exam.. No calculatos o any kind ae allowed. 3. Show all the calculations..
More informationV. SYMPOSIUM ZUR GERMAN ECONOMIC ASSOCIATION OF BUSINESS ADMINISTRATION GEABA. Optimal Debt Service: Straight vs. Convertible Debt.
. SYMPOSIUM ZUR ÖKONOMISCHEN ANALYSE DER UNTERNEHMUNG Optimal Debt Sevice: Staight vs. Convetible Debt Chistian Koziol Session A3 GERMAN ECONOMIC ASSOCIATION OF BUSINESS ADMINISTRATION GEABA Optimal Debt
More informationMankiw Chapter 10. Introduction to Economic Fluctuations. Introduction to Economic Fluctuations CHAPTER 10
Mankiw Chapter 10 0 IN THIS CHAPTER, WE WILL COVER: facts about the business cycle how the short run differs from the long run an introduction to aggregate demand an introduction to aggregate supply in
More informationECON Intermediate Macroeconomic Theory
ECON 3510 - Intermediate Macroeconomic Theory Fall 2015 Mankiw, Macroeconomics, 8th ed., Chapter 12 Chapter 12: Aggregate Demand 2: Applying the IS-LM Model Key points: Policy in the IS LM model: Monetary
More informationLecture 7: Introduction to Economic Fluctuations, The Keynesian Cross
Macroeconomics 1 Lecture 7: Introduction to Economic Fluctuations, The Keynesian Cross Dr Gabriela Grotkowska Tomasz Gajderowicz Based on slides by Mankiw, Macoreconomcis, 5e Key questions What determines
More informationIntroduction to Economic Fluctuations
CHAPTER 10 Introduction to Economic Fluctuations Modified for ECON 2204 by Bob Murphy 2016 Worth Publishers, all rights reserved IN THIS CHAPTER, OU WILL LEARN: facts about the business cycle how the short
More informationDirección Financiera II
Diección Financiea II Javie Gómez Biscai Albet Banal-stanol Wednesday, Mach 8 th, 01, 9:00 am Maximum duation of the exam: hous THORY point fo each coect answe; -0. points fo wong answes. 1 Fo a potfolio
More informationSt Columba s High School Advanced Higher Maths The Binomial Theorem
St Columba s High School Advanced Highe Maths The Binomial Theoem Contents 1 Intoduction to Binomials Factoial Notation Combinations and and n C 4 Pascal s Tiangle & Binomial Coefficient 6 The Binomial
More informationA STUDY OF RESPONSE SPECTRA OF ACTIVELY-CONTROLLED STRUCTURES DUE TO EARTHQUAKE
13 th Wold Confeence on Eathquake Engineeing Vancouve, B.C., Canada August 1-6, 4 Pape No. 6 A STUDY OF RESPONSE SPECTRA OF ACTIVELY-CONTROLLED STRUCTURES DUE TO EARTHQUAKE Takashi MOCHIO 1 SUMMARY A newly
More informationINVESTMENTS REVIEW: WEEK 1: RISK AVERSION AND CAPITAL ALLOCATION TO RISKY ASSETS:
INVSTMNTS RVIW: WK 1: RISK AVRSION AND CAITAL ALLOCATION TO RISKY ASSTS: xpected Retun: - Thee is a consideable uncetaint about the utue pice o a stock and the dividend income that it pas - To quanti ou
More information