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LECTURE 4 TECHNOLOGICAL CHANGE

LECTURE 4 TECHNOLOGICAL CHANGE. THE MACRO ECONOMIC MODEL Introduction to Economics Class Notes Fall 2000 Charles R. Plott California Institute of Technology. I. a. Spending. I 1. I 1 +a 1. Y 1. Y 2. Y. i. i. i. i. a. Y. M/P. I. I 1. a 1. MD T. MD T. Y. M/P. P. P. P.

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LECTURE 4 TECHNOLOGICAL CHANGE

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  1. LECTURE 4 TECHNOLOGICAL CHANGE

  2. THE MACRO ECONOMIC MODEL Introduction to Economics Class Notes Fall 2000 Charles R. Plott California Institute of Technology

  3. I a Spending I1 I1+a1 Y1 Y2 Y i i i i a Y M/P I I1 a1 MDT MDT Y M/P P P P P* Y M*/P* M/P W/P Y UNKNOWNS .Y income .C consumption .I investment .i interest rate .P price level .L employment .MD money demand .MDT transaction demand for money .MDS speculative demand for money .w nominal wages level GIVENS G Government spending X net exports M nominal money supply b marginal propensity to consume EQUATIONS .Y=C+I+G+X .C=a(i)+bY .I=I(i) .M/P = MD .MD=MDT+MDS .MDT = MDT(Y) .MDS = MDS(i) .DL(w/P)-SL(w/P)=0 .L=SL(w/P) .Y=F(L,..)

  4. EXERCISE #4 THERE IS A SHIFT IN TECHNOLOGY. TECHNOLOGICAL ADVANCE HAS TAKEN PLACE.

  5. I a Spending I1 I1+a1 Y1 Y2 Y i i i i a Y M/P I I1 a1 MDT MDT Y M/P P P P P* Y M*/P* M/P W/P Y

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