Lecture17 - Midterm: Tuesday Nov 16 Topics: Cumulative,...

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1 Midterm: Tuesday Nov 16 Topics: • Cumulative, through this week • Emphasis on topics since Midterm #1 – Unemployment – Money and prices – Solow model/Economic growth – AS/AD IS / LM not included on Midterm #2 Special Exam Rooms 008 Thurs 10-11a MH G449 Professor Shapiro 003 Thurs 3-4p Denn 205 Adi Tappan 180 010 Thurs 4-5p Denn 205 Jamein 011 Thurs 5-6p Lorch 373 Jamein 002 Fri 9-10a Lorch 142 Pawel USB 1250 007 Fri 10-11a Denn 237 Pawel USB 1250 009 Fri 11-12p EH 1372 Yan-Min 004 Fri 1-2p Denn 232 Yan-Min 005 Fri 2-3p Denn 221 Yun Jung 006 Fri 3-4p Lorch 373 Yun Jung Exam in Lorch 140 unless otherwise specified below Readings Today • Mankiw, ch 10, ch 11. IS-LM model Next Thursday • Mankiw, ch 5, ch 12. Open economy
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2 Macroeconomics in the news Expected inflation: • Articles in WSJ and NYTimes about commodity prices and inflation expectations Upcoming topics: • Quantitative easing • Deficit commission • G20: External balance, exchange rate Short run to Long Run Short run: Prices fixed AD determines output Medium run (business cycle frequency): Prices adjust to restore full employment Long run: Capital adjusts to steady state value Balanced growth Money growth neutrality (super neutrality) Expected inflation in steady state In steady state: Price/money grow proportionately SRAS and AD shift upward together Prices grow a steady rate Graphs to be presented in sections this week Contrast short run shocks: AD shifts unexpected Prices fixed (“predetermined”) AD determines output
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3 IS: Investment-Saving equilibrium Review: Investment a negative function of the interest rate I = I(r) IS: Investment-Saving equilibrium I = I(r) Y – c(Y – T) – G = S = I(r) “Loanable funds” S = Resources available for investment = Investment demand The IS curve and the loanable funds model S , I r ( ) 1 2 Y (a) Loanable funds (b) The IS curve 1 2 IS Note: Relaxing output fixed assumption of ch 3 .
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4 Shifting IS curve Note: IS equilibria graphed in (Y,r)-space IS
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Lecture17 - Midterm: Tuesday Nov 16 Topics: Cumulative,...

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