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LECTURE 4 TECHNOLOGICAL CHANGE

This lecture from Fall 2000 explores the impact of technological change on macroeconomic models. Professor Charles R. Plott from Caltech provides insights into the interactions between spending, income, investment, and money demand. The lecture includes key equations that highlight the relationships between consumption, government spending, and overall economic equilibrium. It emphasizes the role of technological advancements in shifting economic dynamics, illustrating their importance in understanding changes in consumption patterns and investment behaviors.

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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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