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- 1. Ekonomi Makro I Jurusan Manajemen 2012/2013 Dosen: Dr. Anggito Abimanyu Latihan Soal Ujian CHAPTER 11 Aggregate Demand II 1
- 2. 1. Tax Cut dan G overnment Expenditure r r LM LM r2 r2 2. r1 r1 1. IS 2 1. IS 2 IS 1 IS 1 Y Y Y1 Y2 Y1 Y2 2. 3. CHAPTER 11 Aggregate Demand II 2
- 3. 2. Monetary policy and the AD curve r LM(M1 /P1 ) r1 LM(M2 /P1 ) r2 IS Y1 Y2 Y P P1 AD2 AD1 Y1 Y2 Y CHAPTER 11 Aggregate Demand II 3
- 4. 3. Summary of policy effects in the Mundell-Fleming model type of exchange rate regime: floating fixed impact on: Policy Y e NX Y e NX fiscal expansion mon. expansion import restriction CHAPTER 11 Aggregate Demand II 4
- 5. 4. The Impossible Trinity Free capital flows Independent Fixed monetary exchange policy rate CHAPTER 11 Aggregate Demand II 5
- 6. 5. Shifting the Phillips curve π Eπ 2 + ν Eπ 1 + ν n u u CHAPTER 11 Aggregate Demand II 6
- 7. 6. Stabilization Policy 1. Advocates of active policy believe: 2. Advocates of passive policy believe: 3. Advocates of discretionary policy believe: 4. Advocates of policy rules believe: CHAPTER 11 Aggregate Demand II 7
- 8. 7. Problems measuring the deficit 1. Inflation 2. Capital assets 3. Uncounted liabilities 4. The business cycle CHAPTER 11 Aggregate Demand II 8
Editor's Notes
- Chapter 10 showed that an increase in G causes the IS curve to shift to the right by ( G)/(1-MPC).
- It’s worth taking a moment to explain why we are holding P fixed at P 1 : To find out whether the AD curve shifts to the left or right, we need to find out what happens to the value of Y associated with any given value of P. This is not to say that the equilibrium value of P will remain fixed after the policy change (though, in fact, we are assuming P is fixed in the short run). We just want to see what happens to the AD curve. Once we know how the AD curve shifts, we can then add the AS curves (short- or long-run) to find out what, if anything, happens to P (in the short- or long-run).
- Table 12-1 on p.356. This table makes it easy to see that the effects of policies depend very much on whether exchange rates are fixed or flexible.
- See pp.364-365. “ Option 1” is allowing free capital flows and maintaining independent monetary policy, but giving up a fixed exchange rate. An example of a country that chooses this option is the United States. “ Option 2” is allowing free capital flows keeping a fixed exchange rate, but giving up independent monetary policy. A country that chooses this option is Hong Kong. “ Option 3” is keeping monetary policy independent, yet fixing the exchange rate. Doing this requires limiting capital flows. An example of a country that practices this option is China.
- After displaying this slide, you might consider giving your students an exercise using the P.C. curve. One possibility would be to ask them to draw a graph of the PC curve, then show what happens to it in the face of an adverse supply shock or an increase in the natural rate of unemployment, giving intuition for each. The intuition for why an increase in the natural rate shifts the PC upward (or rightward) is as follows: At any given value of actual unemployment, an increase in the natural rate implies a decrease in cyclical unemployment, which increases inflation by increasing pressures for wages to rise. Thus, each value of unemployment has a higher value of inflation than before.
- After displaying this slide, you might consider giving your students an exercise using the P.C. curve. One possibility would be to ask them to draw a graph of the PC curve, then show what happens to it in the face of an adverse supply shock or an increase in the natural rate of unemployment, giving intuition for each. The intuition for why an increase in the natural rate shifts the PC upward (or rightward) is as follows: At any given value of actual unemployment, an increase in the natural rate implies a decrease in cyclical unemployment, which increases inflation by increasing pressures for wages to rise. Thus, each value of unemployment has a higher value of inflation than before.
- Before we assess whether the debt is a problem, we first consider whether the standard measures of the debt & deficit are accurate. It turns out they are not, for these four reasons.