Test # 1 review - S = C 0(1 – C 1(Y – T Yield on Bond i...

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GDP = Y + C + I + G + (X – M) Nominal GDP 2006 = SUM P 2006 * Q 2006 Real GDP 2006 = SUM P Base * Q 2006 GDP Deflator = Nominal/Real x 100 CPI = Sum P 2007 * Q base (divided by ) Sum P base * Q Base Rate growth nominal GDP = rate inflation & rate growth real GDP Unemployment Rate = Unemployed/Labor force Z (demand for goods) = C + I + G + (X-M) C = C 0 + C 1 (Y-T) *Disposable Income C 1 = Marginal Propensity to Consume Y = (1/(1-c 1 )) *[C 0 + I + G – C 1 T ] 1/(1-C 1 ) = the multiplyer Ex: C 1 = .6 = .25 Z = C 0 + C 1 (Y – T) + I + G Private Saving = Y – T – C S = I + G + T I = S + (T – G) Investment = Total Savings
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Unformatted text preview: S = - C 0 + (1 – C 1 )(Y – T) Yield on Bond ( i ) = (Bond Value – Issue Price) / IP x 100 When Bond Price increases, Interest Rate decreases M d = $Y * L( i ) Increase Money Supply ↑income, ↓ i rate Below LM: i increases excess demand money Above LM: i decreases excess demand bonds I = I (Y, i ) (+, - ) Below IS: excess demand (y right) Above IS: excess supply (y left) T or G affect curve IS relation –Y = C(Y-T) + I(Y, i ) + G LM relation – M/P = Y L( i ) Slope is change i / change Y...
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