Lecture 8 Introduction to the goods market

Lecture 8 Introduction to the goods market -...

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!"# %&'() *+,, &'-') ./012330/ 42+5/67 .++, 89:+52: ;<-&<&'-' ;=>; .? (2@58/2 A= (+B0/ ?+/C25 !D86,6B/68E ! !"#$%&" ( "#$%&'()$*&# $& $+, -&&'. /0%1,$ Last time ± finish labor supply: the labor supply curve ( Chapt e r 3 . 3 ) ± labor market equilibrium ( e r 3 . 4 ) ± the FE line ( e r 9 . 1 ) ± TFP experiments ( e r 3 . 4 ) ± read on your own: unemployment ( e r 3 . 5 ) Today ± introduction to the goods market ( e r 4 . 1 ) ± the consumption/saving choice ( e r s 4 . 1 and 4 . A ) Next time ± the consumption/saving choice ( e r s 4 . 1 and 4 . A ) 2+0$ +033,#. $& $+, &($3($ 3%&'(),'4 How aggregate output is used, is determined in the goods market ± From the national income accounting identity, output is used as one of the expenditure components Y = C + I + G + NX ± Reinterpret this accounting identity as an equilibrium condition: The goods market is in equilibrium when the d e s ir levels of expenditure components (demand) add up to total output produced (supply). Assumptions for now: ± Desired government purchases are determined by the political process and we treat them as exogenous from an economic perspective. Same for taxes. (We will not relax this assumption) ± The economy is closed so that NX = 0, and NFP = 0. (We will study open economies later) ± Implications: we need to analyze the desired amounts of consumption and investment: ܥ ±²³ ܫ Y C I G ±±
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!"# %&'() *+,, &'-') ./012330/ 42+5/67 .++, 89:+52: ;<-&<&'-' ;=>; .? (2@58/2 A= (+B0/ ?+/C25 !D86,6B/68E # 5+, ,6(*7*8%*(/ )&#'*$*&# &9 $+, -&&'. /0%1,$ The form of the condition that focuses on goods ± in a closed economy, and assuming G is fixed, the equilibrium condition of the goods market is An alternative form that focuses on the flow of funds ± Recall that national saving was defined as S = Y + NFP ± C ± G .
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This note was uploaded on 10/25/2010 for the course ECO 320L taught by Professor Kendrick during the Fall '10 term at University of Texas at Austin.

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Lecture 8 Introduction to the goods market -...

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