Intermediate macroeconomics: dynamic models and policy
Institution
Tilburg University (UVT)
Instagram: ECOsummaries DM me for 20% discount!
Summary for the course ''Intermediate macroeconomics: dynamic models and policy''. This summary was written in order to study for the final. Everything you need to know is available in this summary. Advice: this summary alone will not be enough, t...
Intermediate macroeconomics: dynamic models and policy
All documents for this subject (5)
1
review
By: sabinewolbeek • 3 year ago
By: ecosummaries • 3 year ago
Thanks a lot Sabine! Good luck on your exam! ECOsummaries
Seller
Follow
ecosummaries
Reviews received
Content preview
INTERMEDIATE
MACROECONOMICS:
SUMMARY
@ECOsummaries
→ 20% discount
1
,Intermediate Macroeconomics summary
Lecture 1
Keynesian Cross Model
Output (Y): income determined by the demand side of the economy
Aggregate expenditures: planned expenditures, AE =C + I + G + EX – IM
→ Both C and IM depend positively on Y!
If Y > AE → unplanned investments (add to inventory) → output down → employment down (bust)
If Y < AE → unplanned disinvestments (get from inventory) → output up → employment up (boom)
Equilibrium if Y = AE (it’s short run, so P are sticky)
Example: Higher G
Multiplier of G, C, I = 1/(1-C)
Multiplier of T = -C/(1-C)
Money market and Interest Rates
Real money demand: L(i,Y) Real money supply: M/P
→ Y is positive related and i is negative related → influenced by the CB
Money Demand Money Supply
LM-curve
The higher Y, the higher the interest rate
2
,Interest rate Targeting: The CB usually sets the target interest rate (horizontal line)
If a = 0, M is fixed
if a → infinite, interest rate is fixed
3
, Aggregate expenditure and the goods market
Y = C + I + G + EX – IM
assume for simplicity
- C = c*Y
- I = I – b*i
- EX = x1*Yw + x2*R (Yw = foreign income, R = real exchange rate =
- IM = m1*Y – m2*R → higher R means foreign products become more expensive and
our products become cheaper. E = nominal exchange rate.
Number of domestic currency per unit of foreign currency.
e.g. E=0.7 euros/$, rise in E = depreciation, fall in E = appreciation)
See lecture 1.3, 7:00 for example with exchange rates.
IS curve
Negatively sloped!
→ negative relation between Y and i
LM = equilibrium in money market
IS = equilibrium in the goods market
ISLM = general equilibrium, both markets
For now: IS-LM is a closed economy
model
See exercise for useful derivations
4
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 ecosummaries. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $7.06. You're not tied to anything after your purchase.
