专业课资料 练习题 真题 曼昆宏观经济学英文版讲义 Ecn101_lecture14

1 Econ 101 Intermediate Macro Theory Lecture notes Professor Cetorelli UC Davis Fall 2003 Lecture 14 CHAPTER 4CHAPTER 4Money and InflationMoney and Inflation slide 1 From last time CHAPTER 4CHAPTER 4Money and InflationMoney and Inflation slide 2 The downwardThe downward sloping sloping ADAD curvecurve An increase in the price level causes a fall in real money balances M P causing a decrease in the demand for goods services Y P AD CHAPTER 4CHAPTER 4Money and InflationMoney and Inflation slide 3 Shifting the Shifting the ADAD curvecurve An increase in the money supply shifts the ADcurve to the right Y P AD1 AD2 2 CHAPTER 4CHAPTER 4Money and InflationMoney and Inflation slide 4 The longThe long run aggregate supply curverun aggregate supply curve Y P LRAS Y The LRAS curve is vertical at the full employment level of output CHAPTER 4CHAPTER 4Money and InflationMoney and Inflation slide 5 LongLong run effects of an increase in run effects of an increase in MM Y P AD1 AD2 LRAS Y An increase in Mshifts the ADcurve to the right P1 P2 In the long run this increases the price level but leaves output the same CHAPTER 4CHAPTER 4Money and InflationMoney and Inflation slide 6 The short run aggregate supply curveThe short run aggregate supply curve Y P P SRAS The SRAS curve is horizontal The price level is fixed at a predetermined level and firms sell as much as buyers demand CHAPTER 4CHAPTER 4Money and InflationMoney and Inflation slide 7 ShortShort run effects of an increase in run effects of an increase in MM Y P AD1 AD2 an increase in aggregate demand In the short run when prices are sticky causes output to rise P SRAS Y2Y1 3 CHAPTER 4CHAPTER 4Money and InflationMoney and Inflation slide 8 The SR LR effects of The SR LR effects of MM 0 0 Y P AD1 AD2 LRAS Y P SRAS P2 Y2 A initial equilibrium A B C B new short run eq m after Fed increases M C long run equilibrium CHAPTER 4CHAPTER 4Money and InflationMoney and Inflation slide 9 Continuing from where we ended last time CHAPTER 9CHAPTER 9Introduction to Economic FluctuationsIntroduction to Economic Fluctuations slide 10 ShocksShocks shocks exogenous changes in aggregate supply or demand Shocks temporarily push the economy away from full employment An example of a demand shock exogenous decrease in velocity If the money supply is held constant then a decrease in Vmeans people will be using their money in fewer transactions causing a decrease in demand for goods and services CHAPTER 9CHAPTER 9Introduction to Economic FluctuationsIntroduction to Economic Fluctuations slide 11 LRAS AD2 P SRAS The effects of The effects of a negative demand shocka negative demand shock Y P AD1 Y P2 Y2 The shock shifts AD left causing output and employment to fall in the short run AB C Over time prices fall and the economy moves down its demand curve toward full employment 4 CHAPTER 9CHAPTER 9Introduction to Economic FluctuationsIntroduction to Economic Fluctuations slide 12 Supply shocksSupply shocks A supply shock alters production costs affects the prices that firms charge also called price shocks Examples of adversesupply shocks Bad weather reduces crop yields pushing up food prices Workers unionize negotiate wage increases New environmental regulations require firms to reduce emissions Firms charge higher prices to help cover the costs of compliance Favorablesupply shocks lowercosts and prices CHAPTER 9CHAPTER 9Introduction to Economic FluctuationsIntroduction to Economic Fluctuations slide 13 CASE STUDY CASE STUDY The 1970s oil shocksThe 1970s oil shocks Early 1970s OPEC coordinates a reduction in the supply of oil Oil prices rose 11 in 1973 68 in 1974 16 in 1975 Such sharp oil price increases are supply shocks because they significantly impact production costs and prices CHAPTER 9CHAPTER 9Introduction to Economic FluctuationsIntroduction to Economic Fluctuations slide 14 1 P SRAS1 Y P AD LRAS YY2 The oil price shock shifts SRAS up causing output and employment to fall A B In absence of further price shocks prices will fall over time and economy moves back toward full employment 2 P SRAS2 CASE STUDY CASE STUDY The 1970s oil shocksThe 1970s oil shocks A CHAPTER 9CHAPTER 9Introduction to Economic FluctuationsIntroduction to Economic Fluctuations slide 15 Stabilization policyStabilization policy def policy actions aimed at reducing the severity of short run economic fluctuations Example Using monetary policy to combat the effects of adverse supply shocks 5 CHAPTER 9CHAPTER 9Introduction to Economic FluctuationsIntroduction to Economic Fluctuations slide 16 Stabilizing output with Stabilizing output with monetary policymonetary policy 1 P SRAS1 Y P AD1 B 2 P SRAS2 A Y2 LRAS Y The adverse supply shock moves the economy to point B CHAPTER 9CHAPTER 9Introduction to Economic FluctuationsIntroduction to Economic Fluctuations slide 17 Stabilizing output with Stabilizing output with monetary policymonetary policy 1 P Y P AD1 B 2 P SRAS2 A C Y2 LRAS Y AD2 But the Fed accommodates the shock by raising agg demand results Pis permanently higher but Y remains at its full employment level CHAPTER 9CHAPTER 9Introduction to Economic FluctuationsIntroduction to Economic Fluctuations slide 18 More on stabilization policy later macroeconomics fifth edition N Gregory Mankiw PowerPoint Slides by Ron Cronovich CHAPTER TEN Aggregate Demand I macro 2003 Worth Publishers all rights reserved 6 CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 20 Where are we Where are we Chapter 9 introduced the model of aggregate demand and aggregate supply Long run prices flexible output determined by factors of production technology unemployment equals its natural rate Short run prices fixed output determined by aggregate demand unemployment is negatively related to output CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 21 Where are we Where are we This chapter develops the IS LMmodel a full blown theory that yields the aggregate demand curve We focus on the short run and assume the price level is fixed This chapter and chapter 11 focus on the closed economy case Chapter 12 presents the open economy case CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 22 The Keynesian CrossThe Keynesian Cross A simple closed economy model in which income is determined by expenditure due to J M Keynes This is a historical model We use it to build up the IS curve to be defined later CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 23 The Keynesian CrossThe Keynesian Cross Back for a moment to CH 3 Y C I G Introduce new piece of notation E C I G planned expenditure Y real GDP actual expenditure We want to emphasize now that actual and planned expenditure may be different in the short run Difference between actual planned expenditure unplanned inventories firms stock up more units of goods they intended to if sales are less than expected or they deplete their normal level of inventories should there be higher than expected demand 7 CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 24 Elements of the Keynesian CrossElements of the Keynesian Cross CC YTMPC YT II GGTT EMPC YTIG Actual expenditure Planned expenditure YE consumption function for now investment is exogenous planned expenditure Equilibrium condition govt policy variables CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 25 Graphing planned expenditureGraphing planned expenditure income output Y E planned expenditure E C I G MPC I G MPC T EMPC YTIG CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 26 Graphing the equilibrium conditionGraphing the equilibrium condition income output Y E planned expenditure E Y 45 CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 27 The equilibrium value of incomeThe equilibrium value of income income output Y E planned expenditure E Y E C I G Equilibrium income 8 CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 28 Equilibrium in the Keynesian cross Equilibrium in the Keynesian cross modelmodel The equilibrium as defined in this model corresponds to the equilibrium level of output that we defined and determined in chapter 3 only seen in a different way here The main difference is that here we focus on the short term during which output canmove away from its full employment equilibrium level up or down CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 29 Example An increase in government Example An increase in government purchasespurchases Y E E Y E C I G1 E1 Y1 E C I G2 E2 Y2 Y At Y1 there is now an unplanned drop in inventory so firms increase output and income rises toward a new equilibrium G CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 30 Solving for Solving for Y Y YMPCYTIG 1 YMPCMPC TIG 1 1 YMPCTIG MPC 1 1 YMPC TIG MPC 1 1MPC YG equilibrium condition Remember T and I did not change CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 31 The government purchases multiplierThe government purchases multiplier Example If MPC 0 8 then Definition the increase in income resulting from a 1 increase in G In this model the govt purchases multiplier equals 1 1MPC Y G 1 5 10 8 Y G An increase in G causes income to increase by 5 times as much 9 CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 32 Why the multiplier is greater than 1Why the multiplier is greater than 1 Initially the increase in Gcauses an equal increase in Y Y G But Y C further Y further C further Y So the final impact on income is much bigger than the initial G Suppose the government spends an additional 100 million on defense Then the revenues of defense firms increase by 100 million all of which becomes income to somebody some of it is paid to the workers and engineers and managers the rest is profit paid as dividends to shareholders Hence income rises 100 million Y 100 million G The people whose income just rose by 100 million are also consumers and they will spend the fraction MPC of this extra income Suppose MPC 0 8 so Crises by 80 million To be concrete suppose they buy 80 million worth of Ford Explorers Then Ford sees its revenues increase by 80 million all of which becomes income to somebody either Ford s workers or its shareholders Y 80 million And what do these folks do with this extra income They spend the fraction MPC 0 8 of it causing C 64 million 8 10 of 80 million Suppose they spend all 64 million on Hershey s chocolate bars the ones with the bits of mint cookie inside Then Hershey Foods Corporation experiences a revenue increase of 64 million which becomes income to somebody or other Y 64 million So far the total impact on income is 100 million 80 million 64 million which is much bigger than the government s initial increase in spending But this process continues and the final impact on Yis 500 million because the multiplier is 5 CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 34 An increase in taxesAn increase in taxes Y E E Y E C2 I G E2 Y2 E C1 I G E1 Y1 Y At Y1 there is now an unplanned inventory buildup so firms reduce output and income falls toward a new equilibrium C MPC T Initially the tax increase reduces consumption and therefore E CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 35 Solving for Solving for Y Y YCIG MPCYT C 1MPC MPCYT eq m condition in changes I and Gexogenous Solving for Y MPC 1MPC YT Final result 10 CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 36 The Tax MultiplierThe Tax Multiplier def the change in income resulting from a 1 increase in T MPC 1MPC Y T 0 80 8 4 10 80 2 Y T If MPC 0 8 then the tax multiplier equals CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 37 The Tax MultiplierThe Tax Multiplier is negative A tax hike reduces consumer spending which reduces income is greater than one in absolute value A change in taxes has a multiplier effect on income is smaller than the govt spending multiplier Consumers save the fraction 1 MPC of a tax cut so the initial boost in spending from a tax cut is smaller than from an equal increase in G CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 38 The ISThe IS LM modelLM model Until now the model is overly simple The components of expenditure are all exogenous Now let s go back and reintroduce the interest rate r in the demand for investment function I I r CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 39 Y2Y1 Effect of a decrease in Effect of a decrease in r r r I Y E E C I r1 G E C I r2 G E Y I E Y 11 CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 40 The The ISIS curvecurve def a graph of all combinations of rand Y that result in goods market equilibrium i e actual expenditure output planned expenditure The equation for the IScurve is YC YTI rG CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 41 Y2Y1 Y2Y1 Deriving the Deriving the ISIS curvecurve r I Y E r Y E C I r1 G E C I r2 G r1 r2 E Y IS I E Y CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 42 Why the Why the ISIS curve is negatively slopedcurve is negatively sloped A fall in the interest rate motivates firms to increase investment spending which drives up total planned spending E To restore equilibrium in the goods market output a k a actual expenditure Y must increase CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 43 Fiscal Policy and the Fiscal Policy and the ISIS curvecurve We can use the IS LMmodel to see how fiscal policy Gand T can affect aggregate demand and output Let s start by using the Keynesian Cross to see how fiscal policy shifts the IS curve 12 CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 44 Y2Y1 Y2Y1 Shifting the Shifting the ISIS curve curve G G At any value of r G E Y Y E r Y E C I r1 G1 E C I r1 G2 r1 E Y IS1 The horizontal distance of the IS shift equals IS2 so the IS curve shifts to the right 1 1 MPC YG Y CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 45 Question is is the new level of equilibrium output Y2really attainable Will interest rates really stay constant at r1 Introduce now the theory of liquidity preference A simple theory in which the interest rate is determined by money supply and money demand CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 46 The Theory of Liquidity PreferenceThe Theory of Liquidity Preference Recall from ch 4 People choose how to allocate their income between liquid assets money and interest bearing illiquid assets depending on the level of the interest rate If interest rates go up they will want to hold less money and more assets such as savings accounts stocks bonds etc CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 47 Money SupplyMoney Supply The supply of real money balances is fixed s M PM P M P real money balances r interest rate s M P M P 13 CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 48 Money DemandMoney Demand Demand for real money balances M P real money balances r interest rate s M P M P d M PL r Y L r Y CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 49 EquilibriumEquilibrium The interest rate adjusts to equate the supply and demand for money M P real money balances r interest rate s M P M P M PL r Y L r Y r1 CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 50 The LM curveThe LM curve M PL r Y The LMcurve is a graph of all combinations of rand Ythat equate the supply and demand for real money balances The equation for the LMcurve is CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 51 Deriving the LM curveDeriving the LM curve M P r 1 M P L r Y1 r1 r2 r Y Y1 r1 L r Y2 r2 Y2 LM a The market for real money balances b The LM curve 14 CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 52 Why the Why the LMLM curve is upwardcurve is upward slopingsloping An increase in income raises money demand Since the supply of real balances is fixed there is now excess demand in the money market at the initial interest rate The interest rate must rise to restore equilibrium in the money market CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 53 How How MMshifts the LM curveshifts the LM curve M P r 1 M P L r Y1 r1 r2 r Y Y1 r1 r2 LM1 a The market for real money balances b The LM curve 2 M P LM2 CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 54 How the Fed raises the interest rateHow the Fed raises the interest rate To increase r Fed reduces M M P real money balances r interest rate 1 M P L r r1 r2 2 M P CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 55 CASE STUDY CASE STUDY Volcker sVolcker s Monetary TighteningMonetary Tightening Late 1970s 10 Oct 1979 Fed Chairman Paul Volcker announced that monetary policy would aim to reduce inflation Aug 1979 April 1980 Fed reduces M P8 0 Jan 1983 3 7 How do you think this policy change would affect interest rates How do you think this policy change How do you think this policy change would affect interest rates would affect interest rates 15 CHAPTER 10CHAPTER 10Aggregate Demand IAggregate Demand I slide 56 Volcker sVolcker s Monetary Tightening Monetary Tightening cont cont i 0 1 1983 i 8 2 8 1979 i 10 4 4 1980 i 15 8 flexiblesticky Quantity Theory Fisher Effect Classical Liquidity Preference Keynesian prediction actual outcome The effects of a monetary tightening