经济学原理-宏-讲义6.docVIP

PRINCIPLES OF ECONOMICS – MACROECONOMICS Week 6. Macroeconomic Equilibrium and the IS-LM Model The Effects of Changes in Autonomous Expenditure on P and Y We have seen that: A rise in the price level (P) will shift the aggregate expenditure (AE) curve upwards; and An increase in autonomous expenditure (A) independent of price change will shift the aggregate demand (AD) curve to the right. What will be the effects of an increase in A on P Y? The answer lies on the shape of the SAS curve. In case (a), an increase in A results in AE0AE1, and hence AD0AD1. Because the SAS(H) curve is horizontal, Y and P remains unchanged. In case (b), an increase in A results in AE0AE1, and hence AD0AD1. Because the SAS(V) curve is vertical, P and Y remains unchanged. The reason is that the higher price level, as we have seen, reduces A and hence shift aggregate expenditure back to AE0. So far we have defined the equality of AD and SAS as macroeconomic equilibrium, but we have said little about the derivation of the AD curve – that is, the relationship between AE and P. To derive the AD curve we need to take into account the conditions of demand and supply in both the goods market and the money market. The IS-LM model that we now turn is an essential tool for this purpose. Flow Equilibrium: The IS Curve Recall the aggregate planned expenditure equation AE = C + I + G + (EX - IM) = (a + I + G + EX) + [b(1–t) – m]Y = A + Y Previously we said that N (= Y) is induced expenditure because it varies with Y. Now consider A, the autonomous expenditure, whose investment component is in fact affected by the real interest rate, i.e., I = c – di. (similar to the consumption function C = a + bYd). The aggregate expenditure equation thus becomes AE = (a + c + G + EX) – di + [b(1–t) – m]Y = (A* – di) + Y ( A = A* – di) We now reformulate the condition for the equality of AE and Y – known as flow equilibrium – to take into account the influence