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Lecture 3: Basic Aggregate Demand Model
Lecture 3: Basic Aggregate Demand Model
Model
Production Income
Demand
Model:
behavioral equations equilibrium conditions
Behavioral Equations
Equilibrium
Z(Y) = Y
$
c1
c0+I+G-c1*T 45 Y* Y
Comparative Statics
$
c1
c0+I+G-c1*T 45 Y* Y
Consumer Confidence
c0<c0 $
c0+I+G-c1*T c0+I+G-c1*T 45 Y0 Y(t+1) = Z(t) => (inventories) Other: C(t) = c0+0.5*c1* (Y(t)+Y(t-1)) Macroeconomic policy is tricky lags and leads Y1