【计算机算法基础】Equilibrium in the IS-LM Model.ppt

CHAPTER 10 Context Chapter 9 introduced the model of aggregate demand and supply. Chapter 10 developed the IS-LM model, the basis of the aggregate demand curve. In Chapter 11, we will use the IS-LM model to see how policies and shocks affect income and the interest rate in the short run when prices are fixed derive the aggregate demand curve explore various explanations for the Great Depression Equilibrium in the IS-LM Model The IS curve represents equilibrium in the goods market. Policy analysis with the IS-LM Model Policymakers can affect macroeconomic variables with fiscal policy: G and/or T monetary policy: M We can use the IS-LM model to analyze the effects of these policies. An increase in government purchases 1. IS curve shifts right A tax cut Monetary Policy: an increase in M 1. ?M 0 shifts the LM curve down(or to the right) Interaction between monetary fiscal policy Model: monetary fiscal policy variables (M, G and T ) are exogenous Real world: Monetary policymakers may adjust M in response to changes in fiscal policy, or vice versa. Such interaction may alter the impact of the original policy change. The Fed’s response to ?G 0 Suppose Congress increases G. Possible Fed responses: 1. hold M constant 2. hold r constant 3. hold Y constant In each case, the effects of the ?G are different: Response 1: hold M constant Response 2: hold r constant Response 3: hold Y constant Estimates of fiscal policy multipliers from the DRI macroeconometric model Shocks in the IS-LM Model IS shocks: exogenous changes in the demand for goods services. Examples: stock market boom or crash ? change in households’ wealth ? ?C change in business or consumer confidence or expectations  ? ?I and/or ?C Shocks in the IS-LM Model LM shocks: exogenous changes in the demand for money. Examples: a wave of credit card fraud increases demand for money more ATMs or the Internet reduce money demand EXERCISE: Analyze s