Chapter11工广-精选课件(公开).pptVIP

Aggregate Demand II:Applying the IS -LM Model In this chapter, you will learn… how to use the IS-LM model to analyze the effects of shocks, fiscal policy, and monetary policy how to derive the aggregate demand curve from the IS-LM model The Simple Algebra of the IS-LM Model and the Aggregate demand curve Equilibrium in the IS -LM model The IS curve represents equilibrium in the goods market. 11-1 Explaining Fluctuations with the IS-LM model Fiscal policy: An increase in government spending Fiscal Policy: A tax cut Monetary policy: An increase in M Other 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 shocks with the IS-LM model Use the IS-LM model to analyze the effects of 1. a boom in the stock market that makes consumers wealthier. 2. after a wave of credit card fraud, consumers using cash more frequently in transactions. For each shock, a. use the IS-LM diagram to show the effects of the shock on Y and r. b. determine what happens to C, I, and the unemployment rate. 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 central bank’s response to ?G 0 Suppose the fiscal department increases G. Possible central bank’s 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: Hol