宏观经济学chap10课件

,In this chapter,you will learn,the,IS,curve,and its relation to,the Keynesian cross,the loanable funds model,the,LM,curve,and its relation to,the theory of liquidity preference,how the,IS,-,LM,model determines income and the interest rate in the short run when,P,is fixed,CHAPTER 10,Aggregate Demand I,In this chapter,you will lear,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 run,prices fixed,output determined by aggregate demand,unemployment negatively related to output,CHAPTER 10,Aggregate Demand I,ContextChapter 9 introduced th,Context,This chapter develops the,IS,-,LM,model,the basis of the aggregate demand curve.,We focus on the short run and assume the price level is fixed,(so,SRAS,curve is horizontal).,This chapter(and chapter 11)focus on the closed-economy case.Chapter 12 presents the open-economy case.,CHAPTER 10,Aggregate Demand I,ContextThis chapter develops t,The Keynesian Cross,A simple closed economy model in which income is determined by expenditure.,(due to J.M.Keynes),Notation:,I,=planned investment,E,=,C,+,I,+,G,=planned expenditure,Y,=real GDP=actual expenditure,Difference between actual&planned expenditure =unplanned inventory investment,CHAPTER 10,Aggregate Demand I,The Keynesian CrossA simple cl,Elements of the Keynesian Cross,CHAPTER 10,Aggregate Demand I,consumption function:,for now,plannedinvestment is exogenous:,planned expenditure:,equilibrium condition:,govt policy variables:,actual expenditure=planned expenditure,Elements of the Keynesian Cros,Graphing planned expenditure,CHAPTER 10,Aggregate Demand I,income,output,Y,E,planned,expenditure,E,=,C,+,I,+,G,MPC,1,Graphing planned expenditureCH,Graphing the equilibrium condition,CHAPTER 10,Aggregate Demand I,income,output,Y,E,planned,expenditure,E,=,Y,45,Graphing the equilibrium condi,The equilibrium value of income,CHAPTER 10,Aggregate Demand I,income,output,Y,E,planned,expenditure,E,=,Y,E,=,C,+,I,+,G,Equilibrium income,The equilibrium value of incom,An increase in government purchases,CHAPTER 10,Aggregate Demand I,Y,E,E,=,Y,E,=,C,+,I,+,G,1,E,1,=,Y,1,E,=,C,+,I,+,G,2,E,2,=,Y,2,Y,At,Y,1,there is now an unplanned drop in inventory,so firms increase output,and income rises toward a new equilibrium.,G,An increase in government purc,Solving for,Y,CHAPTER 10,Aggregate Demand I,equilibrium condition,in changes,because,I,exogenous,because,C,=,MPC,Y,Collect terms with,Y,on the left side of the equals sign:,Solve for,Y,:,Solving for YCHAPTER 10 Agg,The government purchases multiplier,Definition:the increase in income resulting from a$1 increase in,G,.,In this model,the govt purchases multiplier equals,CHAPTER 10,Aggregate Demand I,Example:If,MPC,=0.8,then,An increase in,G,causes income to increase 5 times as much!,The government purchases multi,Why the multiplier is greater than 1,Initially,the increase in,G,causes an equal increase in,Y,:,Y,=,G,.,But,Y,C,further,Y,further,C,further,Y,So the final impact on income is much bigger than the initial,G,.,CHAPTER 10,Aggregate Demand I,Why the multiplier is greater,An increase in taxes,CHAPTER 10,Aggregate Demand I,Y,E,E,=,Y,E,=,C,2,+,I,+,G,E,2,=,Y,2,E,=,C,1,+,I,+,G,E,1,=,Y,1,Y,At,Y,1,there is now an unplanned inventory buildup,so firms reduce output,and income falls toward a new equilibrium,C,=,MPC,T,Initially,the tax increase reduces consumption,and therefore,E,:,An increase in taxesCHAPTER 10,Solving for,Y,CHAPTER 10,Aggregate Demand I,eqm condition in changes,I,and,G,exogenous,Solving for,Y,:,Final result:,Solving for YCHAPTER 10 Agg,The tax multiplier,def:the change in income resulting from a$1 increase in,T,:,CHAPTER 10,Aggregate Demand I,If,MPC,=0.8,then the tax multiplier equals,The tax multiplierdef:the ch,The tax multiplier,is,negative,:,A tax increase reduces,C,which reduces income.,is,smaller than the govt spending multiplier,:,Consumers save the fraction(1,MPC,)of a tax cut,so the initial boost in spending from a tax cut is smaller than from an equal increase in,G,.,CHAPTER 10,Aggregate Demand I,The tax multiplieris negative,Exercise:,Use a graph of the Keynesian cross to show the effects of an increase in planned investment on the equilibrium level of income/output.,CHAPTER 10,Aggregate Demand I,Exercise:Use a graph of the Ke,The,IS,curve,def:a graph of all combinations of,r,and,Y,that result in goods market equilibrium,i.e.,actual expenditure(output)=planned expenditure,The equation for the,IS,curve is:,CHAPTER 10,Aggregate Demand I,The IS curvedef:a graph of,Deriving the,IS,curve,r,I,CHAPTER 10,Aggregate Demand I,Y,2,Y,1,Y,2,Y,1,Y,E,r,Y,E,=,C,+,I,(,r,1,)+,G,E,=,C,+,I,(,r,2,)+,G,r,1,r,2,E,=,Y,IS,I,E,Y,Deriving the IS curver ,Why the,IS,curve is negatively sloped,A fall in the interest rate motivates firms to increase investment spending,which drives up total planned spending(,E,).,To restore equilibrium in the goods market,output(,