The very most important formulas and intuitions from the course on just 5 pages. I used these to practice for the exam all the time as they allowed a quick view of the formulas. It discusses the money market, IS-LM model, WS-PS curve, Phillips curve, IS-LM-PC model and the interest parity. One big ...
THE MONEY MARKET THE IS RELATION – INVESTMENT SAVING
MONEY DEMAND: Y =C ( Y −T ) + I ( Y , r + x )+ G
M d =€ YL(i) Which shows us all equilibria for Y=Z. G is an exogeneous variable which therefor
shifts the IS curve (up or down). A change in C or I influences the slope since
Where
these are endogenous
- Y is the output/income
THE LM RELATION – LIQUIDITY MONEY
- L(i) is a function of the interest, determining the demand
i=í
MONEY SUPPLY
The interest rate is set by a central
d i
H
M s=
c +θ(1−c ) authority and is therefore given ¿ í
Where: EXTRA EXPLANATIONS
- Assume that the curves only
- H d denotes the demanded central bank money
shift, do not change the slope!
- c denotes the fraction held by people in currency
- The IS curve shifts to the left or
- θ denotes the desired reserve-deposit ratio
to the right.
- (1−c) is what people save on the bank - This is what shifts IS:
o C increase: shift right
o T increase: Shift left
o Positive expectations: shift right
o G increase: shift right
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller Merijnvan. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $3.21. You're not tied to anything after your purchase.
