Textbook Notes (367,766)
Canada (161,379)
MGEC61H3 (10)
Iris Au (10)
Chapter 16

Chapter 16 Notes

15 Pages
175 Views

Department
Economics for Management Studies
Course
MGEC61H3
Professor
Iris Au
Semester
Summer

Description
Chapter 16: Output and the Exchange Rate in the Short Run Determinants of Aggregate Demand (AD) in an Open Economy There are 4 sources of AD in an open economy: 1) Consumption (C) C is determined by disposable income, Y T. C = C(Y T) = Autonomous C + MPC (Y T) 2) Investment (I) I is determined autonomously. 3) Government spending (G) G is determined autonomously. 4) Net exportCA CA is determined by (Y T) and q. CA = CA(Y T, q) = Autonomous CA MPI (Y MT) + CA q 1 The Equation of AD * D = C ( T )+ +G + CA q = E P , Y T P P * D = D( (+, ) )+ ,(+ ,)= E ) + P) How Output is Determine in the Short Run ECMC61 Chapter 16 1 www.notesolution.com Output market equilibrium is given by AD = AS = Output (Y). * Y = D( Y , T , I , G ,E ) + )( + )+( ) )P (+ ) In the short run, P are P* are held fixed. Output Market Equilibrium in the Short Run: The DD Schedule The DD schedule: it shows the relationship between output and the exchange rate for which the output market is in short-run equilibrium. Deriving the DD Schedule Along the D = Y line, the output market is in equilibrium. Along any aggregate demand curve (D), autonomous C, I, G, T, autonomous CA, E, P and P* are held constant. Keynesian Cross Diagram D Y = D 0 D(E ) A 45o Y 0 Y E E0 A 0 Y Y ECMC61 Chapter 16 2 www.notesolution.com
More Less

Related notes for MGEC61H3
Me

Log In

OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view

OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.

Request Course
Submit