Y
GDP
C
aggregate consumption
I
investment
G
Government spending
NX
net exports
Yd (d come apice) e formula
Disposable income
Y + Tr - Ta
Tr
(gov) transfer to the private
Ta
Total taxation
Sp
Private savings
BD
(Gov) budget deficit
Sg
è inverso a?
government savings
inverso a BD
Sg= - BD
AD
aggregate demand
P
price level
K
physical capital stock
AS
aggregate supply
M
offerta di moneta
L
domanda di liquidità
wage equation
W = PAF u(-) z(+)
real wage equation
W/P = AF u(-) z(+)
in the Short-run:
– prices are
– output is determined by
– unemployment is ____ related to ___
Short-run:
– prices fixed
– output determined by aggregate demand
– unemployment negatively related to output
Consumption function
C = C con la barretta sopra + c YD(apice)
Ccon la barretta sopra > 0
0 < c piccola < 1
disposable income
YD(apice) = Y +Ta -Tr
c piccola
marginal propensity to consume
C grande con la barretta sopra
autonomous consumption
Investment function
I = Icon la barretta sopra - br
I con la barretta sopra > 0
b maggiore o = di 0
b < infinito
I
Investment in physical (fixed) capital
I grande con la barretta sopra
Autonomous investment
b
Sensitivity of investment with respect to r
r
given by…?
Real interest rate, given by r = i - p greco e(apice)
p greco e(apice)
Expected inflation rate
i
Nominal interest rate
i = r +p greco e apice
Fiscal policy
G =G con la barretta; G con la barretta > 0
Tr = Tcon la barretta r ; Tcon la barretta r> 0
Ta = Tcon la barretta a , Tcon la barretta a > 0;
or Tcon la barretta a =tauY, tau > 0
Aggregate demand definition and equilibrium condition in a CLOSED ECONOMY
AD =(con tre linee) C + I + G
Y= AD
The IS curve shows _____
The IS curve shows all the combinations of r and Y
that result in goods market equilibrium
The equation for the IS curve is
Y = A con la barretta + c piccola Y - br
A con la barretta
autonomous aggregate demand
A con la barretta = C con la barretta + c (Tcon la barretta r - T con la barretta a ) + I con la barretta + G con la barretta.
MONEY DEMAND
People demand money for making transactions, covering
unexpected needs and choosing the desired portfolio
composition
real MONEY DEMAND is given by
M d apice / P = kY - hi
k e h sono behavioral numbers