Principles of Economic Growth LaGuardia Community College经济增长的原理拉瓜迪亚社区学院.pptVIP

Balance of payments adjustment and economic policy Experiment: Export boom Experiment: Export boom Experiment: Export boom Experiment: Export boom Comments on experiment An export boom stimulates aggregate demand because Y = C + I + G + X - Z Therefore, all other comparable boosts to aggregate demand will have same effect: Consumption C (e.g., through lower taxes) Investment I (e.g., via lower interest rates) Government spending G GNP will rise when AD increases as long as AS curve slopes up Economic policy Economic policy instruments Exogenous variables Fiscal policy: Government spending, taxes Monetary policy: Money, credit, interest rates Exchange rate policy: Exchange rate (if fixed) Structural policy: Liberalization, privatization, etc. Economic objectives or targets Endogenous variables GNP level or growth Price level or inflation Employment, unemployment BOP, exchange rate (if flexible), external debt Aims of economic policy Apply policy instruments to attain given economic objectives External balance: conduct monetary, fiscal, and exchange rate policy so as to make the balance of payments position sustainable Key to financial programming Not only crisis management in short run Internal balance: conduct policy so as to foster rapid, sustainable economic growth with low inflation and unemployment Key to economic and social prosperity Aggregate demand Y = C + I + G + X – Z C = c(Y-T) = (1-s)(1-t)Y where s = saving rate and t = tax rate I = k(M/P) through interest rates G = exogenous X = aY* - br Z = mY + cr where r = eP/P* (real exchange rate) and increase in r means appreciation, as before Aggregate demand Y = (1-s)(1-t)Y + k(M/P) + G + (aY* - b(eP/P*)) – (mY + c(eP/P*)) which means: Y = F(P; M, G, t, e; Y*, P*) - + + - - + + Aggregate demand schedule slopes down via real balances and the real exchange rate ... and shifts in response to changes in exogenous variables, including policy Aggregate supply Y = F(N) N = N(W/P) Labor demand va