Increase income tax rate What are the effects on the loanable funds market? t→T→Y-T→prⅳ vate savings↓ However T↑→T-G↑→> public savings↑ Therefore the final result will be Depends. e
Increase income tax rate ◼ What are the effects on the loanable funds market? t↑→T↑→Y – T↓→private savings↓ However, T↑→T – G↑→public savings↑ Therefore, the final result will be… Depends… ☺
Quantity Demanded v.S. Demand r↑or! affects I r2 A B I2 I1
Quantity Demanded v.s. Demand ◼ r ↑or↓affects __I____ r1 r2 I2 I1 A B I( r )
Quantity Demanded v.S. Demand (r)↑ orlaffects I(r) S, I
Quantity Demanded v.s. Demand ◼ ___I ( r )___↑or↓affects S, I r S I( r ) E E’ r* r*’ I (r )’
Natural Rate of Unemployment Definitions a)Misery index: the sum of inflation and unemployment rates b)Natural rate of unemployment: the average rate of unemployment around which the economy fluctuates
Natural Rate of Unemployment ◼ Definitions a) Misery index: the sum of inflation and unemployment rates b) Natural rate of unemployment: the average rate of unemployment around which the economy fluctuates
Natural Rate of Unemployment - In eq'm, natural rate of unemployment is a constant f X*K U=s * E f: the rate of job finding s: the rate of job separation U: unemployed E: employed
Natural Rate of Unemployment ◼ In eq’m, natural rate of unemployment is a constant f * U=s * E f: the rate of job finding s: the rate of job separation U: unemployed E: employed