Econ110BW11 - Lec5 A - GR_ol

Econ110BW11 - Lec5 A - GR_ol - Macroeconomics B Econ 110B...

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Macroeconomics B Econ 110B–Winter 2011 Prof. Giacomo Rondina Lecture 5
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Plan for Lecture 5 Present Discounted Value Bonds Yield Curve and Economic Activity 2 Expectations: the Basic Tools (Ch. 14)
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Present Discounted Value Two Period Model 3 Expectations: the Basic Tools (Ch. 14) ' 11 YC rr += + + + Present Discounted Value of Consumption 1 1 r + Discount Factor Present Discounted Value of Real Income
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Present Discounted Value Two Period Model What is the PDV of Income in Dollars? 4 Expectations: the Basic Tools (Ch. 14) $ , $ ', YYi $' $ $ 1 Y VY i =+ +
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Present Discounted Value Three Periods: t, t+1, t+2 5 Expectations: the Basic Tools (Ch. 14) 12 $ $ $ tt t YY Y ++ 1 t i Period t Period t+1 Period t+2 11 t i +
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Present Discounted Value Three Periods: t, t+1, t+2 6 Expectations: the Basic Tools (Ch. 14) 12 $ $ $ tt t YY Y ++ 2 11 $ $ 1 t t Y VY i + + =+ + 1 t i Period t Period t+1 Period t+2 t i +
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Present Discounted Value Three Periods: t, t+1, t+2 7 Expectations: the Basic Tools (Ch. 14) 12 $ $ $ tt t YY Y ++ 2 11 $ $$ 1 t t Y VY i + + =+ + 1 t i Period t Period t+1 Period t+2 t i + 1 t i t Y 1 1 $ 1 t t V i + +
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Present Discounted Value Three Periods: t, t+1, t+2 8 Expectations: the Basic Tools (Ch. 14) 12 $ $ $ tt t YY Y ++ 2 11 $ $$ 1 t t Y VY i + + =+ + 1 t i Period t Period t+1 Period t+2 t i + 1 t i t Y 1 1 $ 1 t t V i + +
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Present Discounted Value Three Periods: t, t+1, t+2 9 Expectations: the Basic Tools (Ch. 14) 12 $ $ $ tt t YY Y ++ 2 11 $ $$ 1 t t Y VY i + + =+ + 1 t i Period t Period t+1 Period t+2 t i + 1 t i t Y () ( ) 2 1 1 1 $ $ 1 1 t t t t Y Y ii i i + + + + +
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Present Discounted Value n+1 Periods: t, t+1, t+2,….,t+n Expected Present Discounted Value 10 Expectations: the Basic Tools (Ch. 14) 12 $ $ $ .... $ tt t t n YY Y Y ++ + 1 t i 11 t i + () ( ) ( ) ( ) 1 1 1 1 1 1 1 $$ $ $ $ ..... 1 1 1 1 1 1 t n t t t t n Y VY ii i i i i + + =+ + + + + + + + t i + tn i + − ( ) 1 1 1 1 1 $ $ $ 1 1 1 1 1 1 ee e e t n e t t n Y i i + + + + + + +
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Present Discounted Value: Special Cases Special Case 1 11 Expectations: the Basic Tools (Ch. 14) 12 $ = $ = $ = . .. = $ $ tt t t n YY Y Y Y ++ + = () 11 / 1 $$ / 1 n t i VY i −+ = 2 1 1 = .. = t t n ii i i i + =
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Econ110BW11 - Lec5 A - GR_ol - Macroeconomics B Econ 110B...

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