ECN 600 Lecture Notes - Lecture 1: Nominal Interest Rate, Real Interest Rate, Open Market Operation

257 views9 pages
29 Feb 2016
Department
Course
Professor

Document Summary

Chapter 9: the is-lm model: macroeconomic equilibrium with fixed prices. E = c + i + g + nx. E = [c0 + cy(1-t)y] + [io ir x r] + g + [xfyf + x - im . E = a + mpe x y yy] Expenditure = autonomous expenditure + marginal propensity to expend x y. Autonomous spending a = c0 + [io ir x r] + g + [xfyf + x ) . A higher interest rate reduces autonomous spending (a) by reducing investment (ir x r) r a = (ir x r) . A higher interest rate also reduces autonomous spending by reducing net exports r a = (x ) ** 0 - r x (r-rf) r reducing net exports. Autonomous spending and the real interest rate (r) a = [c0 + io + g + (xfyf + x 0 x rf)] (ir + x r) x r.

Get access

Grade+
$40 USD/m
Billed monthly
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
10 Verified Answers
Class+
$30 USD/m
Billed monthly
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
7 Verified Answers

Related Documents

Related Questions