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econ-macro class 3 (what he said)

10 Pages

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Sherry Fukuzawa

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- government gives money and also takes money - tax-subsidy= net taxes - income-net taxes=net income - t=net tax rate - government tax - government get's more tax then it spends - budget defecate - taxes it receives = the taxes it receives (called balanced budget) - trade sector - exports-imports= - depends on the output (how much money they make) the more they make the more they buy - how much we buy from foreign countries depends on domestic output - depends on the marginal propensity to import - percentage of income will be spent on foreign goods because we cannot produce those outputs - Nx= Ex-IM = Ex(depends on domestic output)-MpMxY (depends on domestic output) - export is autonomous-does not depend on domestic income (given level) - Imports depends on Income, the slope is marginal propensity to import - changing of the curves - increase in foreign income will increase domestic output - price level in Canada rises-everything becomes more expensive not just to domestic buyers but also to foreign buyers - our export will drop due to this - export curve will shift down - domestic foreign goods become relatively cheaper then before, so we would buy more at every level of income (domestic goods are more expensive) - that means an increase in MPM; IM is steeper - when we incorporate changes in Canada only, then the export will decrease and import (MPM) will increase - net export curve will become steeper - rise in price level domestically will lower export and increase import and net export will deteriorate and drop (before it was positive-look at pic) - exchange rate - what is the interest of exchange rate - if 1 Canadian dollar= 1 US dollar then it doesn't matter - so if exchange is the same, 1 dozen eggs=$4; if the americans eggs cost $2 they will not buy from canada - on the other hand Canadians will buy from the US, thus America's export goes up and import goes down...vise versa for canada - with exchange rate - Canadian dollars depreciated-means that each US dollar can get more Canadian dollars - thus 2 Canadian dollars =1 US dollar - so if they get from Canada, goods would be cheaper then Canada's - thus Canadian export increases - on the other hand import of eggs from the US will drop for canadians - over the last 10years, - US and China-US want the Chinese currency to appreciate so that US depreciates - when RMB becomes more valuable - when EX goes up, Import goes down-thus export curve shifts up (becomes cheaper to Chinese buyers)- at the same time MPM drops - thus cou
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