ECON 2H03 Lecture Notes - Lecture 3: Demand Shock, Output Gap, Aggregate Demand
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Consider a closed macro model where y = c + i + g. [3 marks] (the is equation) y = (the lm equation) y = (the ad equation) y = Assume that g is 1000, t is 1000, m is 1500 and p is 1. Assume that m is 1600, while g, t and p remain unchanged. Consider the following small open economy macro model where y = c + i + g + nx. Find the following: [6 marks] (the lm* equation) y = Further assume that g is120, t is 100 and m is 600. Find the following equilibrium values in a flexible exchange rate system: Exchange rate (e) = (s i) = [you must write value of s and i] Assume fixed exchange rate system with e = 1. Assume that g is 100 and t is 100. Question #3: [6 marks] consider the following aggregate demand equation.
