Econcheatsheet - :(. r,income.2.Unknowable)commodity demand,costofcredit,capacityutilization,taxincentives E=a(MPC)YD I G;E=a I G(intercept(MPC)YD S T=I

Econcheatsheet - :(. r,income.2.Unknowable)commodity...

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Unformatted text preview: Determinants of investment: expectations of profitability (formed under conditions of uncertainty 1. Knowable variables like ​ r​ , income. 2. Unknowable) commodity demand, cost of credit, capacity utilization, tax incentives. ​ E=a+(MPC)YD​ +I+G; E=a+I+G(intercept)+ (MPC)YD​ S+T=I+G (C is negative, and use MPS: 1­MPC) Recess. Gap­Y*<YF​ Inflat. Gap­ Y*> YF ​ D​ ​ ​ Keynes: C=300+.6Y​ , I=160, G=200, T=200 LM constr: ↑y from yo ​ to y1​ → ↑MD ​​ ↔ ↓BD​ , ↓PB​ ↔ ↑r from ro​ to r1 ​ ​ ​ ​ ​ ​ ​ ​ LM ↑ y­elas of MD​ : ↑y → larger ↑MD​ → ↓BD​ , larger ↓PB​ → ↑r → steeper LM ​ ​ LM ↑r­ elas: ↑r → larger ↓ MD​ (flatter MD​ ) ​ ​ ↑yD​ → ↑MD​ → smaller ↑r → flatter LM Shift: change in $ supply ​ ​ ​ ↑MS ​ → ↑BD​ , ↑PB​ → ↓ r → down/right LM ​ MD​ (y​ ) o​ Shift: change in liquidity pref. ​ ↑econ. Uncertainty → ↑MD​ @ current y (y​ ) o​ D​ B​ → ↓B​ & ↓P​ → ↑r, shift LM up IS constr: ↑r → ↓I → ↓y @ which I=S IS ↑r­ elas: ↓r → larger ↑I → ↑ y → flatter IS (use I​ I​ ) L ​ H​ ​ 1​ IS ↑ slope of S curve: Steeper S → smaller ↑y @ which… → steeper IS (need ro​ & r​ , use S​ ​ St & S ​ Fl) ​ Exogenous ∆I: (​ I+G​ )>(​ S+T​ ) at y​ y=multiplier (IS shifts out if inc. in I) (no shift in r) o , ​∆ Exogenous ∆G: (​ I+G​ )>(​ S+T​ ) at yo , ​​ ∆ y=multiplier (IS shifts out if inc. in I) (no shift in r) Exogenous ∆T: (​ I+G​ )<(​ S+T​ ) at yo ​ , ↓y=multiplier (I+G [1st graph] doesn’t change, S+T shifts up, ​ IS shifts in, no shift in r) ​ ​ D​ ​ Agg. Demand constr: ↑P → ↓ (MS​ /P) → LM shift ↤ → no ∆ MD​ , ↓PB​ → ↑r → ↓I → ↓y Tr → ​ ↓B​ ​ ​ ​ Agg. Demand shift: ↑MS​ → ↑(MS​ /P) → LM shifts ↦ → no ∆ MD​ → Agg Supply constr: ↑P → ↑MPN * P → ↑Y =F(N,K) Tr ​ D​ B​ ↑B​ , ↑P​ → ↓r → ↑I → ↑y, AD shifts out ...
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