Tutorial_CHAP11 英文版宏經講義.ppt

1、,CHAPTER 11 Aggregate Demand II,MANKIWS MACROECONOMICS MODULES,A PowerPointTutorial To Accompany MACROECONOMICS, 6th. ed. N. Gregory Mankiw By Mannig J. Simidian,Now that weve assembled the IS-LM model of aggregate demand, lets apply it to three issues: 1) Causes of fluctuations in national income 2

2、) How IS-LM fits into the model of aggregate supply and aggregate demand in Chapter 9 3) The Great Depression,The IS-LM Model of AD,IS-LM,Explaining Fluctuations with the IS-LM Model,The intersection of the IS curve and the LM curve determines the level of national income, and the interest rate for

3、a given price level. If the IS or LM curve shifts, the short-run equilibrium of the economy changes, and national income fluctuates. Lets examine how changes in policy and shocks to the economy can cause these curves to shift.,IS,LM,r,y,How Fiscal Policy Shifts the IS Curve and Changes the Short-run

4、 Equilibrium,The IS curve shifts to the right by G/(1- MPC) which raises income and the interest rate.,The IS curve shifts to the right by T MPC/(1- MPC) which raises income and the interest rate.,IS,LM,r,y,How Monetary Policy Shifts the LM Curve and Changes the Short-run Equilibrium,The LM curve sh

5、ifts downward and lowers the interest rate which raises income. Why? Because when the Fed increases the supply of money, people have more money than they want to hold at the prevailing interest rate. As a result, they start depositing this extra money in banks or use it to buy bonds. The interest ra

6、te r then falls until people are willing to hold all the extra money that the Fed has created; this brings the money market to a new equilibrium. The lower interest rate, in turn, has ramifications for the goods market. A lower interest rate stimulates planned investment, which increases planned exp

7、enditure, production, and income Y.,The IS-LM model shows that monetary policy influences income by changing the interest rate. This conclusion sheds light on our analysis of monetary policy in Chapter 9. In that chapter we showed that in the short run, when prices are sticky, an expansion in the mo

8、ney supply raises income. But we didnt discuss how a monetary expansion induces greater spending on goods and servicesa process called the monetary transmission mechanism. The IS-LM model shows that an increase in the money supply lowers the interest rate, which stimulates investment and thereby exp

9、ands the demand for goods and services.,Policy Analysis with Macroeconometric Models,The IS-LM model shows how monetary and fiscal policy influence the equilibrium level of income. The predictions of the model, however, are qualitative, not quantitative. The IS-LM model that shows that increases in

10、government purchases raise GDP and that increases in taxes lower GDP. But, when economists analyze specific policy proposals, they must know the direction and size of the effect. Macroeconometric models describe the economy quantitatively, rather than just qualitatively.,IS-LM as a Theory of Aggrega

11、te Demand,From IS-LM to AD,You probably noticed from the IS and LM diagrams that r and Y were on the two axes. Now were going to bring a third variable, the price level (P) into the analysis. We can accomplish this by linking both two-dimensional graphs.,r,P,Y,Y,IS,LM(P1),A,A,AD,To derive AD, start

12、at point A in the top graph. Now increase the price level from P1 to P2.,An increase in P lowers the value of real money balances, and Y, shifting LM leftward to point B.,The +DP triggers a sequence of events that end with a -DY, the inverse relationship that defines the downward slope of AD.,Notice

13、 that r increased. Since r increased, we know that investment will decrease, as it just got more costly to take on various investment projects. This sets off a multiplier process since -DI causes a DY. The - DY triggers -DC as we move up the IS curve.,P1,+G,This translates into a rightward shift of

14、the IS and AD curves.,Suppose there is a +DG.,IS,In the short run, we move along SRAS from point A to point B.,But as the output market clears, in the long-run, the price level will increase from P0 to P2.,This +DP decreases the value of real money balances, which translates into a leftward shift of

15、 the LM curve.,LM,Finally, this leaves us at point C in both diagrams.,r,P,Y,Y,IS,LM(P0),AD,P0,SRAS,A,A,LRAS,Y = C (Y-T) + I(r) + G,M/ P = L (r, Y),Now its time to determine the effects on the variables in the economy.,For the variables Y, P, and r, you can read the effects right off the diagrams.,S

16、hort-run Impacts,Remember that SR is the movement from A to B.,For the variables Y, P, and r, you can read the effects right off the diagrams.,Remember that LR is the movement from A to C.,Long-run Impacts,r,P,Y,Y,IS,LM(P0),AD,P0,SRAS,A,A,LRAS,*,LM(P2),Notice that M/ was increased, thus increasing t

17、he value of the real money supply which translates into a rightward shift of the LM and AD curves.,Suppose there is a +DM.,Look at the appropriate equation that captures the M term:,In the short run, we move along SRAS from point A to point B.,But as the output market clears, in the long run, the pr

18、ice level will increase from P0 to P2.,This +DP decreases the value of the real money supply which translates into a leftward shift of the LM curve.,Finally, this leaves us at point C in both diagrams.,C,= C,Now its time to determine the effects on the variables in the economy.,For the variables Y,

19、P, and r, you can read the effects right off the diagrams.,Short-run Impacts,Remember that SR is the movement from A to B.,C,= C,(P2),Y,Y*,For the variables Y, P, and r, you can read the effects right off the diagrams.,Remember that LR is the movement from A to C.,Long-run Impacts,What if there was

20、an increase in autonomous consumption spending?,1) +DC causes the IS curve to shift right to IS.,LRAS,2) This leads to a rightward shift in AD to AD.,Short Run: Move from A to B.,Long Run: Market clears at P0 to P2 from B to C.,3) +DP causes LM(P0) to shift leftward to LM(P2) due to the lowering of

21、the real value of the money supply.,r,Y,P,Y,IS,AD,P0,LRAS,Y+ P0 r+ C+ I-,0 + + + -,SRAS,r,Y,P,Y,IS,AD,P,0,LRAS,LM(P,2,),LM(P,0,),The Great Depression,The spending hypothesis suggests that perhaps the cause of the decline may have been a contractionary shift of the IS curve. The money hypothesis atte

22、mpts to explain the effects of the historical fall of the money supply of 25 percent from 1929 to 1933, during which time unemployment rose from 3.2 percent to 25.2 percent. Some economists say that deflation worsened the Great Depression. They argue that the deflation may have turned what in 1931 w

23、as a typical economic downturn into an unprecedented period of high unemployment and depressed income. Because the falling money supply was possibly responsible for the falling price level, it could very well have been responsible for the severity of the depression. Lets see how changes in the price

24、 level affect income in the IS-LM model.,The Pigou Effect,In the IS-LM model, falling prices raise income. For any given supply of money M, a lower price level implies higher real money balances, M/P. An increase in real money balances causes an expansionary shift in the LM curve, which leads to hig

25、her income. Another way in which falling prices increase income is called the Pigou effect. In the 1930s, economist Arthur Pigou pointed out that real money balances are part of household wealth. As prices fall and real money balances rise, households increase their consumption spending and the IS c

26、urve shifts to the right.,debt-deflation theory,There are two theories to explain how falling prices could depress income rather than raise it. Debt-deflation theory, unexpected falls in the price level Effects of expected inflation,Debt-deflation theory redistributes wealth between creditors and debtors. A fall in th