文档介绍：Chapter 5: Goods and Financial Market :The IS-LM Model
5-1:The Goods Market and the IS Relation
5-2:Financial Market and the LM Relation
5-3:The IS-LM Model :Exercise
5-4:Using a Policy Mix
5-5: Adding Dynamics
5-6:Does the IS-LM Model Actually Capture What Happens in the Economy?
5-1:The Goods Market and the IS Relation
Summarize what we learned in chapter 3
Investment, Sales, and the interest rate
The IS curve
Shifts in the IS Curve
Summarize
Summarize what we learned in chapter 3
We characterized equilibrium in the goods market as the condition that production,Y,be equal to the demand for goods, Z. We called this condition the IS relation, because it can be reinterpreted as the condition that investment be equal to saving.
Summarize what we learned in chapter 3
We defined demand as the sum of consumption,investment,and government spending. We assumed that consumption was a function of disposable e(e minus taxes), and took investment spending, government spending, and taxes as given. The equilibrium condition was given by
Y=c(Y-T)+I+G
Summarize what we learned in chapter 3
Using this equilibrium condition, we then looked at the factors that changed equilibrium output. We looked at particular at the effects of changes in government spending and of shifts in consumption demand
Investment, Sales, and the interest rate
In our first model of output determination, investment was left unexplained—we assumed it was constant, even when output changed. Investment is in fact far from constant, and it depends primarily on two factors:
●The level of sales
●The interest rate
To capture these two effects, we write the investment relation as follows:
I=I(Y,i) ()
(+,-)
Equation () states that investment depends on production, Y, and the interest rate,i.
The IS Curve
Taking into account the investment relation (), the equilibrium condition in the goods market es
Y=c(Y-T)+I(Y,i)+G ()
The supply of goods (the left side) must be equal to the demand f