review3 - Monetary Policy Rules and Aggregate Demand ) ( -...

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Unformatted text preview: Monetary Policy Rules and Aggregate Demand ) ( - =- t t m r R The IS Curve ) ( ~ r R b a Y t t-- = The AD Curve ) ( ~ -- = t t m b a Y The AD Curve t Y ~ t a AD The Aggregate Supply Curve o Y t t t + + =- ~ 1 t Y ~ o t +- 1 AS The Steady State: =- 1 t t Y ~ t AD AS The Dynamic Algebra of AD and AS o Y m b a Y t t t t t + + =-- =- ~ ) ( ~ 1 Rearrange: [ ] [ ] o a m b m b o m b a t t t t t + + + = + +-- + =-- 1 1 1 ) ( Solve: + + + + + = - m b o a m b m b t t 1 1 1 Comparative Advantage: An Algebraic Example Northern Economy: Workers of Number orker produced/w Computers orker produced/w Apples : : : N N N L z x Southern Economy: Workers of Number orker produced/w Computers orker produced/w Apples : : : S S S L z x Autarky S S S N N N S S N N z x p z x p x w x w = = = = 2 2 2 2 2 2 2 2 2 2 2 2 S S S S S N N N N N S s S S N N N N S s S N N N z x z x c z x z x c x w c p x w c p x w a x w a = = = = = = = = = = = = Free Trade with Complete Specialization...
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This note was uploaded on 07/17/2008 for the course ECON 502.02 taught by Professor Mccafferty during the Spring '08 term at Ohio State.

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review3 - Monetary Policy Rules and Aggregate Demand ) ( -...

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