Econ 4.3

Monday, April52, 1999

Announcements: There will be review session in 262 Willard on Tuesday, 4/6, from 6:30 to 8 pm. The exam is Wednesday, 4/7. See the webpage for exam three materials. The exam will cover chapters 10 to 14.

Lecture notes:  

Models

• Money Market
• Interest rate decreases
• Opportunity cost of holding money increases
• Demand for Investment
• New technology would shift curve to the right
• AE Model
• AE = C + I + G + (EX - IM)

Multipliers

• 1. Expenditure
  • 1 / 1 - MPC = 1 / MPS
• 2. Tax Multiplier
  • 1 / MPS - 1 (add negative sign)
• 3. Balanced Budget Multiplier
  • 1
• 4. Money Multiplier
  • 1 / rr

• Withdrawals and Injections
• W = S + T
• J = I + G + (EX - IM)
• Contractionary Monetary Policy reduces the money supply and shifts the curve to the left
• Excess demand in a short run / long run curve tends to lead to raised prices