lectures in macroeconomics- charles w. upton spending foolishly
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![Page 1: Lectures in Macroeconomics- Charles W. Upton Spending Foolishly](https://reader035.vdocuments.site/reader035/viewer/2022062313/56649d5e5503460f94a3dd05/html5/thumbnails/1.jpg)
Lectures in Macroeconomics- Charles W. Upton
Spending FoolishlyP
r
Y
M
Po
ro
Pick any point on the Y curve.
DY=SY
![Page 2: Lectures in Macroeconomics- Charles W. Upton Spending Foolishly](https://reader035.vdocuments.site/reader035/viewer/2022062313/56649d5e5503460f94a3dd05/html5/thumbnails/2.jpg)
Spending Foolishly
The Y and M Curves
P
r
Y
M
Po
ro
![Page 3: Lectures in Macroeconomics- Charles W. Upton Spending Foolishly](https://reader035.vdocuments.site/reader035/viewer/2022062313/56649d5e5503460f94a3dd05/html5/thumbnails/3.jpg)
Spending Foolishly
The Y Curve
P
r
Y
M
Po
ro
Pick any point on the Y curve.
DY=SY
![Page 4: Lectures in Macroeconomics- Charles W. Upton Spending Foolishly](https://reader035.vdocuments.site/reader035/viewer/2022062313/56649d5e5503460f94a3dd05/html5/thumbnails/4.jpg)
Spending Foolishly
The Y Curve
P
r
Y
M
Po
ro
Does the event (e.g. people become more confident about the future) mean DY>SY or
DY<SY?
DY=SY
![Page 5: Lectures in Macroeconomics- Charles W. Upton Spending Foolishly](https://reader035.vdocuments.site/reader035/viewer/2022062313/56649d5e5503460f94a3dd05/html5/thumbnails/5.jpg)
Spending Foolishly
The Y Curve
P
r
Y
M
Po
ro
Suppose DY>SY . To get back on the Y curve, the Auctioneer would have to raise r or P. Thus Y curve shifts up and to the right.
DY=SY
![Page 6: Lectures in Macroeconomics- Charles W. Upton Spending Foolishly](https://reader035.vdocuments.site/reader035/viewer/2022062313/56649d5e5503460f94a3dd05/html5/thumbnails/6.jpg)
Spending Foolishly
The M Curve
P
r
Y
M
Po
ro
Pick any point on the M curve.
DM=SM
![Page 7: Lectures in Macroeconomics- Charles W. Upton Spending Foolishly](https://reader035.vdocuments.site/reader035/viewer/2022062313/56649d5e5503460f94a3dd05/html5/thumbnails/7.jpg)
Spending Foolishly
The M Curve
P
r
Y
M
Po
ro
Does the event (e.g. people become more confident) about the future mean DM>SM or
DM<SM?
DM=SM
![Page 8: Lectures in Macroeconomics- Charles W. Upton Spending Foolishly](https://reader035.vdocuments.site/reader035/viewer/2022062313/56649d5e5503460f94a3dd05/html5/thumbnails/8.jpg)
Spending Foolishly
The M Curve
P
r
Y
M
Po
ro
DM=SM
Suppose DM>SM . To get back on the M curve, the Auctioneer would have to raise r or lower P. Thus M curve shifts down and to the right.
![Page 9: Lectures in Macroeconomics- Charles W. Upton Spending Foolishly](https://reader035.vdocuments.site/reader035/viewer/2022062313/56649d5e5503460f94a3dd05/html5/thumbnails/9.jpg)
Spending Foolishly
Some Problems
• The government decides to spend $X this year on a foolish project. – People pay a surcharge on last year’s tax return.– No Labor Supply Effects
![Page 10: Lectures in Macroeconomics- Charles W. Upton Spending Foolishly](https://reader035.vdocuments.site/reader035/viewer/2022062313/56649d5e5503460f94a3dd05/html5/thumbnails/10.jpg)
Spending Foolishly
The Foolish Expenditure
• Pick a point on the Y curve.
P
r
Y
M
Po
ro
![Page 11: Lectures in Macroeconomics- Charles W. Upton Spending Foolishly](https://reader035.vdocuments.site/reader035/viewer/2022062313/56649d5e5503460f94a3dd05/html5/thumbnails/11.jpg)
Spending Foolishly
The Foolish Expenditure
• Pick a point on the Y curve.
• DY>SY
– Govt Spending up by $X
– Wealth down by $X; consumption down by (say) 0.04X
P
r
Y
M
Po
ro
DY>SY
![Page 12: Lectures in Macroeconomics- Charles W. Upton Spending Foolishly](https://reader035.vdocuments.site/reader035/viewer/2022062313/56649d5e5503460f94a3dd05/html5/thumbnails/12.jpg)
Spending Foolishly
The Foolish Expenditure
• Pick a point on the Y curve.
• DY>SY
• The Auctioneer must lower DY
P
r
Y
M
Po
ro
DY>SY
![Page 13: Lectures in Macroeconomics- Charles W. Upton Spending Foolishly](https://reader035.vdocuments.site/reader035/viewer/2022062313/56649d5e5503460f94a3dd05/html5/thumbnails/13.jpg)
Spending Foolishly
The Foolish Expenditure
• Pick a point on the Y curve.
• DY>SY
• The Auctioneer must lower DY
P
r
Y
M
Po
ro
DY>SYMemo to the auctioneer:
To cut DY, raise r
To raise DY lower r
![Page 14: Lectures in Macroeconomics- Charles W. Upton Spending Foolishly](https://reader035.vdocuments.site/reader035/viewer/2022062313/56649d5e5503460f94a3dd05/html5/thumbnails/14.jpg)
Spending Foolishly
The Foolish Expenditure
• Pick a point on the Y curve.
• DY>SY
• The Auctioneer must lower DY
P
r
Y
M
Po
ro
DY>SY
![Page 15: Lectures in Macroeconomics- Charles W. Upton Spending Foolishly](https://reader035.vdocuments.site/reader035/viewer/2022062313/56649d5e5503460f94a3dd05/html5/thumbnails/15.jpg)
Spending Foolishly
The Foolish Expenditure
• Pick a point on the Y curve.
• DY>SY
• The Auctioneer must lower DY
• The Y curve shifts up and to the right
P
r
Y
M
Po
ro
DY>SY
![Page 16: Lectures in Macroeconomics- Charles W. Upton Spending Foolishly](https://reader035.vdocuments.site/reader035/viewer/2022062313/56649d5e5503460f94a3dd05/html5/thumbnails/16.jpg)
Spending Foolishly
The Foolish Expenditure
• Pick a point on the M curve.
P
r
Y
M
Po
ro
![Page 17: Lectures in Macroeconomics- Charles W. Upton Spending Foolishly](https://reader035.vdocuments.site/reader035/viewer/2022062313/56649d5e5503460f94a3dd05/html5/thumbnails/17.jpg)
Spending Foolishly
The Foolish Expenditure
• Pick a point on the M curve.
• DM<SM
P
r
Y
M
Po
ro
DM<SM
![Page 18: Lectures in Macroeconomics- Charles W. Upton Spending Foolishly](https://reader035.vdocuments.site/reader035/viewer/2022062313/56649d5e5503460f94a3dd05/html5/thumbnails/18.jpg)
Spending Foolishly
The Foolish Expenditure
• Pick a point on the M curve.
• DM<SM
– Wealth down
– Consumption Down
– Money Demand Down
P
r
Y
M
Po
ro
DM<SM
![Page 19: Lectures in Macroeconomics- Charles W. Upton Spending Foolishly](https://reader035.vdocuments.site/reader035/viewer/2022062313/56649d5e5503460f94a3dd05/html5/thumbnails/19.jpg)
Spending Foolishly
The Foolish Expenditure
• Pick a point on the M curve.
• DM<SM
• The Auctioneer must raise DM
P
r
Y
M
Po
ro
DM<SM
![Page 20: Lectures in Macroeconomics- Charles W. Upton Spending Foolishly](https://reader035.vdocuments.site/reader035/viewer/2022062313/56649d5e5503460f94a3dd05/html5/thumbnails/20.jpg)
Spending Foolishly
The Foolish Expenditure
• Pick a point on the M curve.
• DM<SM
• The Auctioneer must raise DM
P
r
Y
M
Po
ro
DM<SMMemo to the auctioneer:
To cut DM, raise r
To raise DM lower r
![Page 21: Lectures in Macroeconomics- Charles W. Upton Spending Foolishly](https://reader035.vdocuments.site/reader035/viewer/2022062313/56649d5e5503460f94a3dd05/html5/thumbnails/21.jpg)
Spending Foolishly
The Foolish Expenditure
• Pick a point on the M curve.
• DM<SM
• The Auctioneer must raise DM
P
r
Y
M
Po
ro
DM<SM
![Page 22: Lectures in Macroeconomics- Charles W. Upton Spending Foolishly](https://reader035.vdocuments.site/reader035/viewer/2022062313/56649d5e5503460f94a3dd05/html5/thumbnails/22.jpg)
Spending Foolishly
The Foolish Expenditure
• Pick a point on the M curve.
• DM<SM
• The Auctioneer must raise DM
• The M curve shifts up and to the left
P
r
Y
M
Po
ro
DM<SM
![Page 23: Lectures in Macroeconomics- Charles W. Upton Spending Foolishly](https://reader035.vdocuments.site/reader035/viewer/2022062313/56649d5e5503460f94a3dd05/html5/thumbnails/23.jpg)
Spending Foolishly
The Foolish Expenditure
• The Y curve shifts up and to the right.
• The M curve shifts up and to the left
P
r
Y
M
Po
ro
![Page 24: Lectures in Macroeconomics- Charles W. Upton Spending Foolishly](https://reader035.vdocuments.site/reader035/viewer/2022062313/56649d5e5503460f94a3dd05/html5/thumbnails/24.jpg)
Spending Foolishly
The Foolish Expenditure
• The Y curve shifts up and to the right.
• The M curve shifts up and to the left
• Price level up• Interest rate uncertain.
P
r
Y
M
Po
ro
![Page 25: Lectures in Macroeconomics- Charles W. Upton Spending Foolishly](https://reader035.vdocuments.site/reader035/viewer/2022062313/56649d5e5503460f94a3dd05/html5/thumbnails/25.jpg)
Spending Foolishly
End
©2003 Charles W. Upton. All rights reserved