Chapter 16 Output and the Exchange Rate in the Short Run 国际财务管理课件.pptVIP

Chapter 16 Output and the Exchange Rate in the Short Run Determinants of Aggregate Demand in an Open Economy The Equation of Aggregate Demand How Output Is Determined in the Short Run Output Market Equilibrium in the Sort Run: The DD Schedule Asset Market Equilibrium in the Short Run: The AA Schedule Short-Run Equilibrium for an Open Economy: Putting the DD and AA Schedules Together Temporary Changes in Monetary and Fiscal Policy Inflation Bias and Other Problems of Policy Formulation Permanent Shifts in Monetary and Fiscal Policy Macroeconomic Policies and the Current Account Gradual Trade Flow Adjustment and Current Account Dynamics Introduction Macroeconomic changes that affect exchange rates, interest rates, and price levels may also affect output. This chapter introduces a new theory of how the output market adjusts to demand changes when product prices are themselves slow to adjust. A short-run model of the output market in an open economy will be utilized to analyze: The effects of macroeconomic policy tools on output and the current account The use of macroeconomic policy tools to maintain full employment 16-1 Determinants of Aggregate Demand in an Open Economy Aggregate demand The amount of a country’s goods and services demanded by households and firms throughout the world. The aggregate demand for an open economy’s output consists of four components: Consumption demand (C) Investment demand (I) Government demand (G) Current account (CA) Determinants of Consumption Demand Consumption demand increases as disposable income (i.e., national income less taxes) increases at the aggregate level. The increase in consumption demand is less than the increase in the disposable income because part of the income increase is saved. Determinants of the Current Account The CA balance is viewed as the demand for a country’s exports (EX) less that countrys own demand for imports (IM). The CA balance is determined by two main factors: The domestic currency’s real exc