ECON 2HH3 Lecture Notes - Total Factor Productivity, Pearson Education, Competitive Equilibrium
8 Mar 2014
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Outline: government, competitive equilibrium, effects of changes in government. Purchases: effects of changes in total factor. After studying this chapter, you will be able to. Explain how interactions among consumers, firms, and the government lead to an equilibrium through price adjustment. Analyze the effects of changes in government spending on the equilibrium outcome. Explain the effects of an increase in total factor productivity on the equilibrium outcome. Government: government is one of the three actors in an economy, it undertakes fiscal policy, fiscal policy refers to the government"s choices over its expenditures, taxes, transfers, and borrowing, these choices are limited by the government budget constraint. Equilibrium modeling: a model takes exogenous variables and determines endogenous variables. Exogenous variables are determined outside of a macroeconomic model. Given the exogenous variables, the model determines the endogenous variables. Equilibrium modeling: hypothetical experiments involve analyzing how changes in exogenous variables affect the endogenous variables, figure 5. 1 shows how a model works.
