上海交通大学中级媛宏观经济学讲义-经济周期理论.pptVIP

* * * * * * * Chapter 10 showed that an increase in G causes the IS curve to shift to the right by (?G)/(1-MPC). * Chapter 10 used the Keynesian Cross to show that a decrease in T causes the IS curve to shift to the right by (-MPC??T)/(1-MPC). If your students ask why the IS curve shifts to the right when there’s a negative sign in the expression for the shift, remind them that ?T 0 for a tax cut, so the expression actually is positive. The term showing the distance of the shift in the IS curve is almost the same as in the case of a government spending increase, where the numerator of the fraction equals (1) for government spending rather than (-MPC) for the tax cut. Here’s the intuition: Every dollar of a government spending increase adds to aggregate spending. However, for tax cuts, the fraction (1-MPC) of the tax cut leaks into saving, so aggregate spending only rises by MPC times the tax cut. * Chapter 10 showed that an increase in M shifts the LM curve to the right. Here is a richer explanation than what appears on this slide: The increase in M causes the interest rate to fall. [People like to keep optimal proportions of money and bonds in their portfolios; if money is increased, then people try to re-attain their optimal proportions by “exchanging” some of the money for bonds: they use some of the extra money to buy bonds. This increase in the demand for bonds drives up the price of bonds -- and causes interest rates to fall (since interest rates are inversely related to bond prices). The fall in the interest rate induces an increase in investment demand, which causes output and income to increase. The increase in income causes money demand to increase, which increases the interest rate (though doesn’t increase it all the way back to its initial value; instead, this effect simply reduces the total decrease in the interest rate). * * * * * The preceding slides show that the impact of fiscal policy on GDP depends on the Fed’s resp