--Z=Demand of goods=C+I+G+(X-M)
--Consumption Function: C=C +C (Y 0. C 1MPD=% of1each dollar of Y you consume. D
--Goods Market Equlib: Y=Z=C +C (Y-T0+I(1, Y)+G S
--Money Market Equlib: Demand for Liquidity(L)=M
--Savings: Total Saving=Investments. Private: S=Y-T-C. Public: S=T-G.
--Multiplier: Y=Z=1/(1-C ) bottom is always multiplier. Change Y=Change G*Multiplier
--Bonds: i=(FV-P )/B IntB.est rate is opportunity cost of holding money. High i means high
return on bond.
--Bond Demand= Wealth -M . d
--IS Curve: Means solve for Y. Y Inc and i dec though inc of I. If dec G or inc T, IS shifts left.
If Inc G or dec T, IS shifts right.
--IS Curve slope down cuz: When interest rates rise, output falls directly though I and indirectly
through NX. D
--LM Curve: Means (M/P) =M/P. Curve shifts left when sell bonds, shifts right when buy
--Monetary Policy: Is central bank can change M through OMO but buying(expansionary) and
--IS shifts when change in fiscal policy. LM shifts in change in monetary policy.
--Real ER: €=(EP*)/P.
--Interest Parity Condition: i=i*t tE t+1–E)tE.tSecond part is expected dep. of CAD. If <
better to purchase foreign bond.
--What Determines Exports:1)Foreign Demand(Y*)-If Y* inc then X inc.2)Rea