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notes_macro_ch4 - MACROECONOMICS Macro Notes G.Karras 2011...

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Macro Notes © G.Karras 2011 MACROECONOMICS Georgios Karras* University of Illinois at Chicago * Professor of Economics; Mailing Address: Department of Economics, University of Illinois at Chicago, 601 S. Morgan St., Chicago, IL 60607-7121; e-mail: [email protected] . Lecture Draft Do not cite without permission
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Macro Notes © G.Karras 2011, p.2 ││ 4 ││ THE GOODS AND SERVICES MARKET 4.1. The Equilibrium Relationship Equilibrium (in general): Supply = Demand Macro Goods and Services: Production = Expenditure Algebraically: Y = C + I + G + NX
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Macro Notes © G.Karras 2011, p.3 Assume (for now): closed economy. Two versions: Strong version: EX = IM = 0 NX = 0 Weak version: EX = IM NX = 0 So, Equilibrium: S I G C Y I G I C Y S     Saving National because S S S G T C T Y G C Y G P S S G P  
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Macro Notes © G.Karras 2011, p.4 4.2. Saving. Main Determinants: ♦ Factor #1: Real interest rate: r ( ) S P ↑ (↓ ) S ( ) Saving curve has a positive slope : 0 S r S 7% 3% $400b $900b
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Macro Notes © G.Karras 2011, p.5
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Macro Notes © G.Karras 2011, p.6
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Macro Notes © G.Karras 2011, p.7
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Macro Notes © G.Karras 2011, p.8 Recall: G C Y G T C T Y S S S G p ) ( ♦ Factor #2 :
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