Intermediate Macroeconomics Lecture 9
Intermediate Macroeconomics Lecture 9
Questions from Last Lecture 令 Demand for money↑ =L(r,Y D↑ while s fixed L(r,Y: hold r&ly to balance the pressure of dt; holdY, tr to balance Y
Questions from Last Lecture ❖ Demand for money ↑ D ↑while S fixed → L(r,Y): hold r &↓Y to balance the pressure of D ↑; hold Y, ↑r to balance ( , ) s d M M M L r Y P P P − − = = = r Y LM IS
IS-LM as a Theory of Aggregate Demand oIS-LM model shows the relationship between r and Y at a given price level o What if P changes? P↑→(MP A/P2 M/P1 L(〔,Y) W/P
IS-LM as a Theory of Aggregate Demand ⚫IS-LM model shows the relationship between r and Y at a given price level ⚫What if P changes? P↑→ (M/P)↓ M/P2 P2 AD r M/P L(r,Y) M/P1 Y r IS LM P1 P Y
IS-LM as a Theory of Aggregate Demand o Change in monetary policy S AD
IS-LM as a Theory of Aggregate Demand ⚫Change in monetary policy r Y IS LM AD Y P
IS-LM as a Theory of Aggregate Demand ● Change in Fiscal Policy S AD
IS-LM as a Theory of Aggregate Demand ⚫Change in Fiscal Policy r Y IS LM AD Y P