Econ+310+Winter+2010+Topic+6a

Econ+310+Winter+2010+Topic+6a - Economics310...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
Economics 310 Money and Banking Topic 6(a) Simple Macro  Models  
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 Lecture 1 Readings Mishkin, Chapters 19, 20 and 21 Only the first part of 19 (Quantity Theory) Also, look back at the last half of Chapter 5  (Liquidity Preference Model)
Background image of page 2
3 Lecture 1 Modeling the macroeconomy Main concern:  determination of the level of  economic activity Y = real GDP Total output (in real terms) Real National Income Real Aggregate spending P = aggregate price level P Y = nominal GDP Dollar value of output/spending/national income
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
4 Lecture 1 Y = real output/income/spending P = aggregate price level M d  =  demand  for nominal money balances v = number of times $1 can be used in a given time period  “Velocity of money” v M  = P Y i.e. M  = P Y       or   M     =  Y . v  P  v Demand for money balances Real money demand is proportionate to real national income (Y) Nominal money demand is proportionate to nominal income (P Y) Quantity Theory
Background image of page 4
5 Lecture 1 In equilibrium, money demand will equal money supply  M = nominal money supply Equilibrium Condition:      Velocity, v, is assumed constant M is exogenous Changes in M reflected in proportionate changes in P Y is determined independently Changes in Y are either “accommodated” with changes in M, or  result in changes in P Quantity Theory    =       =     Y .    Y .   P           v P           v
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
6 Lecture 1 Equilibrium Condition:      If v changes, then %ΔM - %ΔP  = %ΔY - %Δv If v constant, then %ΔM - %ΔP  = %ΔY  Quantity Theory    =       =     Y .    Y .   P           v P           v
Background image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 27

Econ+310+Winter+2010+Topic+6a - Economics310...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online