GOV_EXPENDITURES

GOV_EXPENDITURES - b marginal propensity to consume...

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LECTURE 5 MONETARY FINANCED GOVERNMENT DEBT
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THE MACRO ECONOMIC MODEL Introduction to Economics Class Notes Fall 2000 Charles R. Plott California Institute of Technology
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Y Y i i i Spending a I a 1 I 1 a I I 1 I 1 +a 1 Y 1 Y 2 i MD T MD T Y Y P P M/P M/P M/P M * /P * P * W / P Y P UNKNOWNS .Y income .C consumption .I investment .i interest rate .P price level .L employment .MD money demand .MD T transaction demand for money .MD S speculative demand for money .w nominal wages level GIVENS G Government spending X net exports M nominal money supply
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Unformatted text preview: b marginal propensity to consume EQUATIONS .Y=C+I+G+X .C=a(i)+bY .I=I(i) .M/P = MD .MD=MD T +MD S .MD T = MD T (Y) .MD S = MD S (i) .DL(w/P)-SL(w/P)=0 .L=SL(w/P) EXERCISE #5 THERE IS AN INCREASE IN GOVERNMENT DEFICIT EXPENDITURES FINANCED BY THE FEDERAL RESERVE SYSTEM Y Y i i i Spending a I a 1 I 1 a I I 1 I 1 +a 1 Y 1 Y 2 i MD T MD T Y Y P P M/P M/P M/P M * /P * P * W / P Y P...
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GOV_EXPENDITURES - b marginal propensity to consume...

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