Econ110BW11 - Lec4 A - GR_ol

Econ110BW11 - Lec4 A - GR_ol - Macroeconomics B Econ 110B...

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Macroeconomics B Econ 110B–Winter 2011 Prof. Giacomo Rondina Lecture 4
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Nominal and Real Interest Rates, and the IS LM Model oes the IS depend on the nominal or the real interest rate? ± Does the IS depend on the nominal or the real interest rate? ± Doest the LM depend on the nominal or the real interest rate? 2 Expectations: the Basic Tools (Ch. 14)
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± The IS depends on the real interest rate ( ) ( ) , YC Y T I Y r G = −+ + 3 Expectations: the Basic Tools (Ch. 14)
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± The IS depends on the real interest rate 4 Expectations: the Basic Tools (Ch. 14) ( ) ( ) :, e IS Y C Y T I Y i G π = −+ +
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± The LM depends on the nominal interest rate () M YL i P = 5 Expectations: the Basic Tools (Ch. 14)
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Nominal and Real Interest Rates, and the IS LM Model LM i i A e IS ( π e A ) r A π A r A =i A - π e A Y Y A ± Changes in Expected Inflation? 6 Expectations: the Basic Tools (Ch. 14)
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Nominal and Real Interest Rates, and the IS LM Model i LM π e B > π e A i A π e i B IS ( π e A ) r A IS ( π e B ) r B r B =i B - π e B Y Y A Y B ± Changes in Expected Inflation 7 Expectations: the Basic Tools (Ch. 14)
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Econ110BW11 - Lec4 A - GR_ol - Macroeconomics B Econ 110B...

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