This document is a lecture on macroeconomic equilibrium using the IS-LM model. It discusses how the IS and LM curves intersect at a single point of general equilibrium where both the goods and money markets are in balance. It then explains how different points on or outside the curves represent disequilibrium situations, and how economic forces push the economy toward the equilibrium point through adjustments in interest rates and output levels. The lecture concludes by showing graphically how an economy initially in disequilibrium will gradually move along the curves toward the point of general equilibrium.
Dr. Katundu is a lecturer at the Moshi Co-operative University (MoCU). He works under the Department of Community and Rural Development specializing in the area of rural development. He holds a PhD and Master of Arts in Rural development from the Sokoine University of Agriculture (SUA), Morogoro Tanzania and a Bachelor of Arts (Hons) in Geography and Environmental Studies from the University of Dar-Es-Salaam, Tanzania. His research interests include: Agriculture and rural development, rural land reform, rural livelihoods and cooperatives, community driven development, environment and natural resource management, entrepreneurship development, impact evaluation. His PhD thesis is titled: Entrepreneurship Education and Business Start Up: Assessing Entrepreneurial Tendencies among University Graduates in Tanzania whereas; Master dissertation is titled: Evaluation of the Association of Tanzania Tobacco Traders’ Reforestation Programme: The Case of Urambo District.
Dr. Katundu is a lecturer at the Moshi Co-operative University (MoCU). He works under the Department of Community and Rural Development specializing in the area of rural development. He holds a PhD and Master of Arts in Rural development from the Sokoine University of Agriculture (SUA), Morogoro Tanzania and a Bachelor of Arts (Hons) in Geography and Environmental Studies from the University of Dar-Es-Salaam, Tanzania. His research interests include: Agriculture and rural development, rural land reform, rural livelihoods and cooperatives, community driven development, environment and natural resource management, entrepreneurship development, impact evaluation. His PhD thesis is titled: Entrepreneurship Education and Business Start Up: Assessing Entrepreneurial Tendencies among University Graduates in Tanzania whereas; Master dissertation is titled: Evaluation of the Association of Tanzania Tobacco Traders’ Reforestation Programme: The Case of Urambo District.
Consumer Behavior: Income and Substitution Effects
The Consumer’s Reaction to a Change in Income
Engel Curve or Engel’s Law
The Consumer’s Reaction to a Change in Price
The Consumer’s Demand Function
Cobb-Douglas Utility Function
The Slutsky Substitution Effect
The Hicks substitution effect
It shows the meaning of aggregate demand and aggregate supply. Why aggregate demand curve downward slopping? Show the Short run and Long run Aggregate demand aggregate supply.
Consumer Behavior: Income and Substitution Effects
The Consumer’s Reaction to a Change in Income
Engel Curve or Engel’s Law
The Consumer’s Reaction to a Change in Price
The Consumer’s Demand Function
Cobb-Douglas Utility Function
The Slutsky Substitution Effect
The Hicks substitution effect
It shows the meaning of aggregate demand and aggregate supply. Why aggregate demand curve downward slopping? Show the Short run and Long run Aggregate demand aggregate supply.
Develop and share in your discussion post a leadership coaching or.docxsimonithomas47935
Develop and share in your discussion post a leadership coaching or mentorship program for a student or for a new hire at your work. How would you determine if the program worked?
Keep initial post to under 300 words.
Grading: This is a graduate course so all discussion responses should be written using proper grammar, spelling, and proper writing formatting. Up to one point will be deducted for grammar and spelling problems.
References to the text should be provided to support your responses. To keep referencing simple for discussions you may use the abbreviated form of page number(s) for the Hughes text. (pp. 46-47) For the Hirsh text use (Hirsh, p. 3). For other references use proper standard APA format. Up to two points may be deducted for not using text references in your discussion posts.
Textbook Reference:
Hughes, R. L., Ginnett, R. C., & Curphy, G. J. (2015). Leadership: Enhancing the lessons of
experience (8th ed.). New York: McGraw-Hill/Irwin.
1
3) The Mundell-Fleming Model (IS-LM-FE)
International Finance
1
In the 1960s and early 1970s
Orthodox (or neoclassical) economists were split between Monetarist economists (the minority, including Milton Friedman) and Neo-Keynesian economists (the majority, including Paul Samuelson)
Monetarists believed if central banks kept control of the money supply, they would control inflation; that the economy naturally tends towards full employment; that government should balance their budgets; and that exchange rates should float.
Neo-Keynesians believed economies could remain below full employment for a long time; that governments should run fiscal deficits when needed to achieve close to full employment; that monetary policy was not a reliable mechanism for controlling demand; and (in many but not all cases) preferred fixed exchange rates
2
2
Introducing IS-LM (Neo-Keynesian)
The closed economy model of aggregate demand developed by John Hicks in the late 1930s, just after Keynes’ General Theory
It was the standard ‘working model’ used by economists when discussing macroeconomic policy from the 1940s to the 1980s. Some, like Krugman, prefer it to more recent models even now.
In the 1960s, Mundell and Fleming developed an open economy version (The ‘Mundell-Fleming’, or IS-LM-FE Model)
There are many things wrong with it. It is not used widely in modern orthodox macroeconomics, and people like me have even greater objections, but we need to take a look at it.
3
3
Open Economy IS-LM
IS (G,Q, y*)
y
r
r0
y0
4
‘Money Market Equilibrium’ (for a given real money supply)
‘Goods Market Equilibrium’ (for a given real exchange rate and fiscal policy)
‘Equilibrium’ in both markets
IS-LM-FE Model
An open economy version of the ‘Neo-Keynesian’ model, which dominated macroeconomics in the 1960s, but still frames the thinking of many modern economists.
The standard version is a ‘fixed price’ or short run model – the price level is held constant.
There is no role f.
In Keynesian Economics equilibrium is reached at a point where Ad equals AS. On the Other hand for equilibrium Consumption must equal Investment given the fact that S = I. The rete of interest which is the major determinant of Investment is determined in Money Market. It is therefore essential that at equilibrium all these markets should be in equilibrium. IS LM explains simultaneous equilibrium in all the markets.
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This slide is special for master students (MIBS & MIFB) in UUM. Also useful for readers who are interested in the topic of contemporary Islamic banking.
it describes the bony anatomy including the femoral head , acetabulum, labrum . also discusses the capsule , ligaments . muscle that act on the hip joint and the range of motion are outlined. factors affecting hip joint stability and weight transmission through the joint are summarized.
The simplified electron and muon model, Oscillating Spacetime: The Foundation...RitikBhardwaj56
Discover the Simplified Electron and Muon Model: A New Wave-Based Approach to Understanding Particles delves into a groundbreaking theory that presents electrons and muons as rotating soliton waves within oscillating spacetime. Geared towards students, researchers, and science buffs, this book breaks down complex ideas into simple explanations. It covers topics such as electron waves, temporal dynamics, and the implications of this model on particle physics. With clear illustrations and easy-to-follow explanations, readers will gain a new outlook on the universe's fundamental nature.
Biological screening of herbal drugs: Introduction and Need for
Phyto-Pharmacological Screening, New Strategies for evaluating
Natural Products, In vitro evaluation techniques for Antioxidants, Antimicrobial and Anticancer drugs. In vivo evaluation techniques
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Normal Labour/ Stages of Labour/ Mechanism of LabourWasim Ak
Normal labor is also termed spontaneous labor, defined as the natural physiological process through which the fetus, placenta, and membranes are expelled from the uterus through the birth canal at term (37 to 42 weeks
Macroeconomics- Movie Location
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Prepare a presentation or a paper using research, basic comparative analysis, data organization and application of economic information. You will make an informed assessment of an economic climate outside of the United States to accomplish an entertainment industry objective.
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Exploiting Artificial Intelligence for Empowering Researchers and Faculty,
International FDP on Fundamentals of Research in Social Sciences
at Integral University, Lucknow, 06.06.2024
By Dr. Vinod Kumar Kanvaria
বাংলাদেশের অর্থনৈতিক সমীক্ষা ২০২৪ [Bangladesh Economic Review 2024 Bangla.pdf] কম্পিউটার , ট্যাব ও স্মার্ট ফোন ভার্সন সহ সম্পূর্ণ বাংলা ই-বুক বা pdf বই " সুচিপত্র ...বুকমার্ক মেনু 🔖 ও হাইপার লিংক মেনু 📝👆 যুক্ত ..
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1. MOOCS by Dr. Subir Maitra
Course Name: M.Com Year: First
Session: 2017-18
Paper- 1.3
Macroeconomics and Business Environment
Module: One
Lecture-11
Department of Commerce
University of Calcutta
MOOCS by Dr. Subir Maitra, Associate Professor of Economics, HCC, subirmaitra.wixsite.com/moocs
2. General Equilibrium: Aspects of Closed Economy--
Commodity Market and Money Market Equilibrium--
IS-LM Approach.
IS-LM MODEL: GENERAL EQUILIBRIUM,
ADJUSTMENT TO EQUILIBRIUM
MOOCS by Dr. Subir Maitra, Associate Professor of Economics, HCC, subirmaitra.wixsite.com/moocs
3. THE IS AND LM SCHEDULES COMBINED
• The upward-sloping LM
schedule shows the points of
equilibrium for the money
market. The downward
sloping IS schedule shows the
points of equilibrium for the
product market. The point of
intersection between the two
schedules, point E in the
figure, is the (only) point of
general equilibrium for the
two markets.
MOOCS by Dr. Subir Maitra, Associate Professor of Economics, HCC, University of Calcutta, subirmaitra.wixsite.com/moocs
4. THE IS AND LM SCHEDULES COMBINED
• If the money market is in
equilibrium, the bond market
must also be in equilibrium.
Thus, the interest rate and
income level at the
intersection of the IS and LM
schedules in the Figure
denoted r0 and Y0, are values
that produce a simultaneous
equilibrium for the money
market, product market, and
bond market.
MOOCS by Dr. Subir Maitra, Associate Professor of Economics, HCC, University of Calcutta, subirmaitra.wixsite.com/moocs
5. Disequilibrium in the IS – LM Model
In the IS – LM model, points other
than the point of intersection of the
two schedules are not points of
equilibrium.
First, consider points above the LM
schedule such as points A and B. At all
points above the LM schedule, there
will be an excess supply of money
(XSM). At the level of income for
either point A or B, the corresponding
interest rate is too high for money
market equilibrium.
MOOCS by Dr. Subir Maitra, Associate Professor of Economics, HCC, University of Calcutta, subirmaitra.wixsite.com/moocs
6. Disequilibrium in the IS – LM Model
With an excess supply of money,
there is downward pressure on the
interest rate, as indicated by the
downward-direction arrow. There
is a tendency to move toward the
LM schedule. Conversely, at points
below the LM schedule, such as
points C and D, there will be an
excess demand for money (XDM)
and consequently upward pressure
on the interest rate.
MOOCS by Dr. Subir Maitra, Associate Professor of Economics, HCC, University of Calcutta, subirmaitra.wixsite.com/moocs
7. Disequilibrium in the IS – LM Model
At points such as B and C, to
the right of the IS schedule,
output will exceed aggregate
demand. Thus, there is an
excess supply of output (XSC),
and therefore a downward
pressure on output, as
indicated by the arrows
pointing to the left.
MOOCS by Dr. Subir Maitra, Associate Professor of Economics, HCC, University of Calcutta, subirmaitra.wixsite.com/moocs
8. Disequilibrium in the IS – LM Model
Conversely, at points to the left
of this IS schedule, such as
points A and D, actual output
is below the level that will clear
the product market. Thus,
there is an excess demand for
output (XDC), and there will
be upward pressure on output,
as indicated by the rightward-
directed arrows at these points.
MOOCS by Dr. Subir Maitra, Associate Professor of Economics, HCC, University of Calcutta, subirmaitra.wixsite.com/moocs
9. Disequilibrium in the IS – LM Model
Points on one schedule but not on
the other are disequilibrium. A
point such as F is a point of
equilibrium for the money market
but a point of excess supply for the
product market.
Similarly, any point along the IS
schedule other than point E would
result in disequilibrium in the
money market.
MOOCS by Dr. Subir Maitra, Associate Professor of Economics, HCC, University of Calcutta, subirmaitra.wixsite.com/moocs
10. Disequilibrium in the IS – LM Model
Only at point E are both the
money and product markets
in equilibrium. There is no
excess demand or supply in
either the money or product
market, and therefore there
are no pressures for the
interest rate or output to
change.
MOOCS by Dr. Subir Maitra, Associate Professor of Economics, HCC, University of Calcutta, subirmaitra.wixsite.com/moocs
11. Adjustment to Equilibrium in the IS – LM Model
In this Figure, we show how a disequilibrium in
the IS-LM model generates such forces in both
the commodity and money markets which
makes the situation converge back to the
equilibrium.
Suppose, the economy is at A, which is
characterized by excess demand in the
commodity market and excess supply in the
money market. The excess demand in
commodity market will force point A to move
in the horizontal direction. The excess supply
in the money market will push point A to move
in the vertical direction. Point A will ultimately
start moving towards G.
MOOCS by Dr. Subir Maitra, Associate Professor of Economics, HCC, University of Calcutta, subirmaitra.wixsite.com/moocs
12. Adjustment to Equilibrium in the IS – LM Model
Suppose, the economy is at G, which is
characterized by excess demand in the
commodity market and excess supply in the
money market. Thus, as in case of A, from G the
economy would start moving towards H, where
money market reaches equilibrium, but the
commodity market is not. Thus, H would be
pushed horizontally as there is excess demand in
the commodity market. Thus, H will gradually
move to I, then to J, K, L etc. and ultimately to E,
where both commodity and money markets are
in equilibrium.
Thus, equilibrium in IS-LM model is stable.
MOOCS by Dr. Subir Maitra, Associate Professor of Economics, HCC, University of Calcutta, subirmaitra.wixsite.com/moocs
13. End of Lecture 11
MOOCS by Dr. Subir Maitra, Associate Professor of Economics, HCC, subirmaitra.wixsite.com/moocs