Lectures in Macroeconomics- Charles W. Upton Government as Consumer.
Lectures in Macroeconomics- Charles W. Upton A Change in
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Lectures in Macroeconomics- Charles W. Upton A Change in P r Y M P o r o Pick any pointon the Y curve. D Y =S Y
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Transcript of Lectures in Macroeconomics- Charles W. Upton A Change in
Lectures in Macroeconomics- Charles W. Upton
A Change in P
r
Y
M
Po
ro
Pick any point on the Y curve.
DY=SY
A Change in Tsi
The Y and M Curves
P
r
Y
M
Po
ro
A Change in Tsi
The Y Curve
P
r
Y
M
Po
ro
Pick any point on the Y curve.
DY=SY
A Change in Tsi
The Y Curve
P
r
Y
M
Po
ro
Does the event (e.g. people become more confident about the future) mean DY>SY or
DY<SY?
DY=SY
A Change in Tsi
The Y Curve
P
r
Y
M
Po
ro
Suppose DY>SY . To get back on the Y curve, the Auctioneer would have to raise r or P. Thus Y curve shifts up and to the right.
DY=SY
A Change in Tsi
The M Curve
P
r
Y
M
Po
ro
Pick any point on the M curve.
DM=SM
A Change in Tsi
The M Curve
P
r
Y
M
Po
ro
Does the event (e.g. people become more confident about the future) mean DM>SM or
DM<SM?
DM=SM
A Change in Tsi
The M Curve
P
r
Y
M
Po
ro
DM=SM
Suppose DM>SM . To get back on the M curve, the Auctioneer would have to raise r or lower P. Thus M curve shifts down and to the right.
A Change in Tsi
Some Problems
• Credit cards are outlawed– An increase in
• Drugs are legalized– A decrease in
A Change in Tsi
A Change in
• If credit cards are outlawed, goes up.– More money is
required as a replacement for credit cards..
P
r
Y
M
Po
ro
A Change in Tsi
A Change in
• If credit cards are outlawed, goes up.
• If drugs are legalized, goes down.– Less money is required
to avoid prosecution.
P
r
Y
M
Po
ro
A Change in Tsi
A Change in
• If credit cards are outlawed, goes up.– More money is
required as a replacement for credit cards..
• If drugs are legalized, goes down.– Less money is required
to avoid prosecution.
P
r
Y
M
Po
ro
We do one: goes up.
A Change in Tsi
A Change in
• Pick a point on the Y curve.
P
r
Y
M
Po
ro
A Change in Tsi
A Change in
• Pick a point on the Y curve.
• DY<SY
P
r
Y
M
Po
ro
DY<SY
A Change in Tsi
A Change in
• Pick a point on the Y curve.
• DY<SY
P
r
Y
M
Po
ro
DY<SY
ii zinin
c)(1
1
A Change in Tsi
A Change in
• Pick a point on the Y curve.
• DY<SY
• The Auctioneer must raise DY
P
r
Y
M
Po
ro
DY<SY
A Change in Tsi
A Change in
• Pick a point on the Y curve.
• DY<SY
• The Auctioneer must raise DY
P
r
Y
M
Po
ro
DY<SYMemo to the auctioneer:
To cut DY, raise r
To raise DY lower r
A Change in Tsi
A Change in
• Pick a point on the Y curve.
• DY<SY
• The Auctioneer must raise DY
P
r
Y
M
Po
ro
DY<SY
A Change in Tsi
A Change in
• Pick a point on the Y curve.
• DY<SY
• The Auctioneer must raise DY
• The Y curve shifts down and to the left
P
r
Y
M
Po
ro
DY<SY
A Change in Tsi
A Change in
• Pick a point on the M curve.
P
r
Y
M
Po
ro
A Change in Tsi
A Change in
• Pick a point on the M curve.
• DM>SM
P
r
Y
M
Po
ro
DM>SM
in
ni c
r
rm
1
The reduction in c is dominated by the increase in
A Change in Tsi
A Change in
• Pick a point on the M curve.
• DM>SM
• The Auctioneer must lower DM
P
r
Y
M
Po
ro
DM>SM
A Change in Tsi
A Change in
• Pick a point on the M curve.
• DM>SM
• The Auctioneer must lower DM
P
r
Y
M
Po
ro
DM>SMMemo to the auctioneer:
To cut DM, raise r
To raise DM lower r
A Change in Tsi
A Change in
• Pick a point on the M curve.
• DM>SM
• The Auctioneer must lower DM
P
r
Y
M
Po
ro
DM>SM
A Change in Tsi
A Change in
• Pick a point on the M curve.
• DM>SM
• The Auctioneer must lower DM
• The M curve shifts down and to the right
P
r
Y
M
Po
ro
DM>SM
A Change in Tsi
A Change in
• The Y curve shifts down and to the left.
• The M curve shifts down and to right
P
r
Y
M
Po
ro
A Change in Tsi
A Change in
• The Y curve down and to the left.
• The M curve shifts down and to right
• P down• Interest rate is
uncertain.
P
r
Y
M
Po
ro
A Change in Tsi
End
©2003 Charles W. Upton. All rights reserved
