中级宏观经济学第十七章

1、2,17-1 Expectations and Decisions: Taking Stock,Expectations, Consumption, and Investment Decisions,Expectations affect consumption and investment decisions, both directly and through asset prices.,3,Note from Figure 17-1: An increase in current and expected future after-tax real labor income, or a

2、decrease in current and expected future real interest rates, increases human wealth and leads to an increase in consumption. An increase in current and expected future real dividends, or a decrease in current and expected future real interest rates, increases stock prices which leads to an increase

3、in nonhuman wealth and an increase in consumption.,17-1 Expectations and Decisions: Taking Stock,Expectations, Consumption, and Investment Decisions,4,Note from Figure 17-1: A decrease in current and expected future nominal interest rates leads to an increase in bond prices, which leads to an increa

4、se in nonhuman wealth and an increase in consumption. An increase in current and expected future real after-tax profits, or a decrease in current and expected future real interest rates, increases the present value of real after-tax profits, which leads to an increase in investment.,17-1 Expectation

5、s and Decisions: Taking Stock,Expectations, Consumption, and Investment Decisions,5,Consumption and investment depend on expectations of the future. To take into account the effect of expectations, we do the following: Earlier, the IS relation was:,Define aggregate private spending or simply, privat

6、e spending, A, as:,Rewrite the IS relation as:,17-1 Expectations and Decisions: Taking Stock,Expectations and the IS Relation,6,Given,and,and incorporating the role of expectations, then:,* Primes denote future values, and e denotes expected values.,The positive and negative signs explain how:,17-1

7、Expectations and Decisions: Taking Stock,Expectations and the IS Relation,7,17-1 Expectations and Decisions: Taking Stock,Expectations and the IS Relation,Given expectations, a decrease in the real interest rate leads to a small increase in output: The IS curve is steeply downward sloping. Increases

8、 in government spending or in expected future output shift the IS curve to the right. Increases in taxes, in expected future taxes, or in the expected future real interest rate shift the IS curve to the left.,8,The new IS curve is steep, which means that a large decrease in the current interest rate

9、 is likely to have only a small effect on equilibrium income, for two reasons: A decrease in the current real interest rate does not have much effect on spending if future expected rates are not likely to be lower as well. The multiplier is likely to be small. If changes in income are not expected t

10、o last, they will have a limited effect on consumption and investment.,17-1 Expectations and Decisions: Taking Stock,Expectations and the IS Relation,9,Changes in other than Y and r, shift the IS curve: Changes in T (current taxes) or G (current government spending) shift the IS curve Changes in exp

11、ected future variables also shift the IS curve.,17-1 Expectations and Decisions: Taking Stock,Expectations and the IS Relation,10,The LM relation is not modified because the opportunity cost of holding money today depends on the current nominal interest rate, not on the expected nominal interest rat

12、e one year from now.,The interest rate that enters the LM relation is the current nominal interest rate.,17-1 Expectations and Decisions: Taking Stock,The LM Relation Revisited,11,the Mission of the FED,“The Congress has entrusted the Federal Reserve with great responsibilities. In every phase of ou

13、r work and decision making, we consider the well-being of the American people and the prosperity of our nation. ” Chair Janet L. Yellen,12,When the Fed expanded the money supply, “the” interest rate went down, and spending increased. There are many interest rates, keep these two distinctions in mind

14、: The distinction between the nominal interest rate and the real interest rate. The distinction between current and expected future interest rates.,17-2 Monetary Policy, Expectations, and Output,13,Decreasing the current nominal interest rate i effects the current and expected future real interest r

15、ates depending on two factors: Whether the increase in the money supply leads financial markets to revise their expectations of the future nominal interest rate, ie. Whether the increase in the money supply leads financial markets to revise their expectations of both current and future inflation e a

16、nd e.,17-2 Monetary Policy, Expectations, and Output,From the Short Nominal Rate to Current and Expected Real Rates,14,17-2 Monetary Policy, Expectations, and Output,From the Short Nominal Rate to Current and Expected Real Rates,The IS curve is steeply downward sloping. Other things equal, a change

17、in the current interest rate has a small effect on output. The LM curve is upward sloping. The equilibrium is at the intersection of the IS and LM curves.,15,17-2 Monetary Policy, Expectations, and Output,Monetary Policy Revisited,The effects of monetary policy on output depend very much on whether

18、and how monetary policy affects expectations.,16,The effects of monetary policy depend crucially on its effect on expectations: If a monetary expansion leads financial investors, firms, and consumers to revise their expectations of future interest rates and output, then the effects of the monetary e

19、xpansion on output may be very large. But if expectations remain unchanged, the effects of the monetary expansion on output will be small.,17-2 Monetary Policy, Expectations, and Output,Monetary Policy Revisited,People form expectations about the future by assessing the likely course of future expec

20、ted policy and then working out the implications of future activity. Economists refer to expectations formed in a forward-looking manner as rational expectations,17,Rational Expectations,Until the 1970s, macroeconomists thought of expectations as: Animal spirits - the Keynesian treatment of expectat

21、ions, which considers them important but unexplained. Backward-looking ruleseither static or adaptive expectations. The assumption of rational expectations is one of the most important developments in macroeconomics in the last 25 years.,18,Recall the conclusions we reached in the core about the eff

22、ects of a budget deficit reduction: In the long run, a reduction in the budget deficit is likely to be beneficial for the economy. In the medium run, a lower budget deficit implies higher saving and higher investment. In the long run, higher investment translates into higher capital and thus higher

23、output. In the short run, however, a reduction in the budget deficit, unless it is offset by a monetary expansion, leads to lower spending and to a contraction in output.,17-3 Deficit Reduction, Expectations, and Output,19,Lets review what we learned about the effects of a deficit reduction in the m

24、edium run and the long run: In the medium run, a deficit reduction has no effect on output. It leads, however, to a lower interest rate and to higher investment. In the long run, higher investment leads to a higher capital stock, and to a higher level of output.,17-3 Deficit Reduction, Expectations,

25、 and Output,The Role of Expectations about the Future,20,17-3 Deficit Reduction, Expectations, and Output,Back to the Current Period,When account is taken of its effect on expectations, the decrease in government spending need not lead to a decrease in output.,21,Deficit reduction may actually incre

26、ase spending and output, even in the short run, if people take into account the future beneficial effects of deficit reduction. In response to the announcement of deficit reduction, Current spending goes downthe IS curve shifts to the left. Expected future output goes upthe IS curve shifts to the ri

27、ght. And the interest rate goes downthe IS curve shifts to the right.,17-3 Deficit Reduction, Expectations, and Output,Back to the Current Period,22,Small cuts in government spending and large expected cuts in the future will cause output to increase more in the current perioda concept known as backloading. Backloading, however, may lead to a problem with the credibility of the deficit