ECON 2000 Lecture Notes - Lecture 85: Fixed Investment, Inventory Investment, Demand Curve
14 May 2018
School
Department
Course
Professor
ECON 2000
Lecture 85
- At short run equilibrium, it’s a fixed price level and demand for goods
is too low to keep econ producing at its natural level
- Over time, low demand causes price level to fall
- Fall in price level raises real money balances, shifting LM* curve to
right
- Real exchange rate depreciates so NX rise
- Eventually, econ reaches pt C which is the long run equilibrium
- Speed of transition between the short-run and long-run equilibria
depends on how quickly the price level adjusts to restore the econ to
natural level of output
- Investment links present and future and most volatile component of
GDP
- When expenditure on goods and services falls during a recession,
much of decline usually due to drop in investment spending
- Business fixed investment includes machinery, equipment and
structures that businesses buy to use in production
- Residential investment includes new housing people buy and
landlords buy to rent
- Inventory investment includes goods that businesses put aside in
storage, including materials and supplies, work in process and
finished goods
-
Business fixed investment
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Document Summary
At short run equilibrium, it"s a fixed price level and demand for goods is too low to keep econ producing at its natural level. Over time, low demand causes price level to fall. Fall in price level raises real money balances, shifting lm* curve to right. Real exchange rate depreciates so nx rise. Eventually, econ reaches pt c which is the long run equilibrium. Speed of transition between the short-run and long-run equilibria depends on how quickly the price level adjusts to restore the econ to natural level of output. Investment links present and future and most volatile component of. When expenditure on goods and services falls during a recession, much of decline usually due to drop in investment spending. Business fixed investment includes machinery, equipment and structures that businesses buy to use in production. Residential investment includes new housing people buy and landlords buy to rent.
