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Class Slides for EC 204 Spring 2006

Class Slides for EC 204 Spring 2006. To Accompany Chapter 10. The Goods Market and the IS Curve. Planned Spending = E = C + I + G E = C(Y-T) + I + G Actual Spending = Y Equilibrium : Actual Spending = Planned Spending Y = E.

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Class Slides for EC 204 Spring 2006

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  1. Class Slides for EC 204Spring 2006 To Accompany Chapter 10

  2. The Goods Market and the IS Curve Planned Spending = E = C + I + G E = C(Y-T) + I + G Actual Spending = Y Equilibrium: Actual Spending = Planned Spending Y = E

  3. The Interest Rate, Investment and the IS Curve Suppose Investment Spending depends on the interest rate: I = I(r) Equilibrium: Y = C(Y-T) + I(r) + G (IS Curve)

  4. Loanable-Funds Interpretation of IS Curve Y - C - G = I S = I Y - C(Y-T) - G = I(r) S(Y) = I(r)

  5. The Money Market and the LM Curve Equilibrium in the Money Market: Real Money Supply = Real Money Demand M/P = L(r, Y) (LM Curve)

  6. The Short-Run Equilibrium Y = C(Y-T) + I(r) + G (IS) M/P = L(r, Y) (LM)

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