EC140 Lecture Notes - Lecture 7: Ceteris Paribus
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EC140 Full Course Notes
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Ec140 lecture #7: adding government and trade to the simple macro model. The net export function the nx function is drawn holding constant: foreign gdp, domestic and foreign prices, the exchange rate. The net export function and a change in international. Relative prices illustration of a rise in canadian prices relative to foreign prices this could be caused by a change in exchange rate or a change in price levels. With taxation, yd is less than y if t =(0. 1)y , then y d=(0. 9) y. C=30+(0. 72) y: the mpc out of national income (0. 72) is less than the mpc out of disposable income (0. 8) Equilibrium national income recall that equilibrium, y, occurs where desired aggregate expenditure = actual national income as before, output is assumed to be demand determined in this model: equilibrium condition is y = ae(y ) Whenever ae is not equal to y, there are unintended changes in inventories and firms have an incentive to change production.
