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Figure I-1. The IS Curve
Output
Interest Rate
IS
Figure I-2. The MP Curve
Output
Interest Rate
MP
Figure I-3. The IS-MP Diagram
Output
Interest Rate
IS
MP
Figure I-4. The Effect of an Increase in Government Purchases on Output at a Given Interest Rate
E = C(Y-T) + I(r) + G0
E = C(Y-T) + I(r) + G1
E = Y
45°
Output
Planned Expenditure
Output
Interest Rate
MP
Figure I-5. The Effects of an Increase in Government Purchases on Output and the Interest Rate
IS0
IS1
Figure I-6. The Effects of a Shift to Tighter Monetary Policy
Output
Interest Rate
MP0
IS
MP1
Output
Interest Rate
MP1
IS1
MP0
Figure I-7. The Effects of Simultaneous Changes in Fiscal and Monetary Policy that Leave Output Unchanged
IS0
Output
Interest Rate
MP
Figure I-8. The Effects of a Fall in Consumer Confidence
IS1
IS0
Figure I-9. The Effects of an Increase in the Money Supply
Output
Interest Rate
IS
•
• E0
E1
•
• B
A
Figure II-1. The Effects of a Rise in the Interest Rate on Equilibrium Output in the Goods Market with Floating Exchange Rates
C(Y-T) + I(r1) + G + CF(r1)
C(Y-T) + I(r0) + G + CF(r0)
E = Y
45°
Output
Planned Expenditure
Figure II-2. The IS-MP Diagram for an Open Economy with Floating Exchange Rates
Output
Interest Rate
IS
MP
CF(r)
ε
NX
NX(ε)
r r
Figure II-3. The Determination of Net Exports and the Exchange Rate Under Floating Exchange Rates
IS
MP
Y CF
Figure II-4. The Effects of an Increase in Government Purchases with Floating Exchange Rates
CF(r)
ε
NX(ε)
r r
IS0
MP
IS1
NX
Y CF
Figure II-5. The Effects of a Shift to Tighter Monetary Policy with Floating Exchange Rates
CF(r)
ε
NX(ε)
r r
IS
MP1
MP0
NX
Y CF
CF(r)
ε
NX
NX0(ε)
r r
Figure II-6. The Effects of Protectionist Policies with Floating Exchange Rates
IS
MP
Y CF
NX1(ε)
-
Figure II-7. Monetary Policy with Fixed Exchange Rates
r r RG(r) = NX(ε)-PCF(r)
RG Y
r
MP ~
0
-
Figure II-8. The Determination of Output and the Interest Rate in an Open Economy with Fixed Exchange Rates
r r RG(r) = NX(ε)-PCF(r)
RG Y
r
MP ~
IS
0
Figure II-9. The Effects of an Increase in Government Purchases with Fixed Exchange Rates
r r RG(r)=NX(ε)-PCF(r)
RG Y
r
MP ~
IS0
0
IS1
-
Figure II-10. The Effects of Expansionary Monetary Policy with Fixed Exchange Rates
r r RG(r)=NX(ε)-PCF(r)
RG Y
r
MP0 ~
IS
0
MP1 ~
E0 ● E1
●
-
Figure II-11. The Effects of Protectionist Policies with Fixed Exchange Rates
Note: RG0(r) = NX0(ε )-PCF(r); RG1(r) = NX1(ε )-PCF(r)
r r RG0(r)
RG Y
IS1
0
RG1(r)
MP1 ~
IS0
r0 MP0 ~
r1
Figure II-12. The Effects of a Fall in Export Demand with Fixed Exchange Rates
Note: RG0(r) = NX0(ε )-PCF(r); RG1(r) = NX1(ε )-PCF(r)
r r RG1(r)
RG Y
IS1
0
RG0(r)
MP0 ~
IS0
r1 MP1 ~
r0
● E0
● E1
Figure II-13. The Effects of a Devaluation
Note: RG0(r) = NX(ε 0)-PCF(r); RG1(r) = NX(ε 1)-PCF(r)
r r RG0(r)
RG Y
IS1
0
RG1(r)
MP1 ~
IS0
r0 MP0 ~
r1
Figure III-1. The Inflation Adjustment Line
Output
Inflation
IA
Figure III-2. The Aggregate Demand Curve
π
AD
Y
r
IS
MP1
MP0
Y
π1
π0
Figure III-3. The AD-IA Diagram
Output
Inflation
IA
AD
Figure III-4. Adjusting to Long-Run Equilibrium
Output
Inflation
IA
AD
A •
• ELR
Y
Figure III-5. Long-Run Equilibrium
Output
Inflation
IA
AD
• ELR
Y
Figure III-6. The Real Interest Rate When the Economy Is in Long-Run Equilibrium
Output
Interest Rate
IS
MP
rLR
Y
Output
Interest Rate
MP
Figure III-7. The Immediate Effects of an Increase in Government Purchases
IS0
IS1
Figure III-8. The Immediate Effects of an Increase in Government Purchases in Terms of the AD-IA Diagram
Output
Inflation
IA
AD0
• E0
Y
AD1
E1 •
Figure III-9. The Effects of an Increase in Government Purchases
Output
Inflation
IA
AD0
•
Y
AD1
1LRE
•
0LRE
Figure III-10. The Long-Run Effects of an Increase in Government Purchases in Terms of the IS-MP Diagram
Output
Interest Rate
MP0
IS0
IS1
MP1
Y
1LRr
0LRr
Figure III-11. The Immediate Effects of a Shift to Tighter Monetary Policy
Output
Interest Rate
MP0
IS
MP1
Figure III-12. The Effects of a Shift to Tighter Monetary Policy
Output
Inflation
IA
Y
AD1
AD0
•
0LRE
•
1LRE
Figure III-13. The Long-Run Effects of a Shift to Tighter Monetary Policy in Terms of the IS-MP Diagram
Output
Interest Rate
MP0, MPLR
IS
MP1
Y
Figure III-14. The Immediate Effects of an Unfavorable Inflation Shock
Output
Inflation
IA0
AD
Y
IA1
Figure III-15. The Effects of an Unfavorable Inflation Shock
Output
Inflation
IA0
AD
Y
IA1
• ELR
Figure III-16. The Effects of a Fall in the Natural Rate of Unemployment
Output
Inflation
IA
AD
0Y
•
0LRE
1Y
1LRE •
Figure III-17. The Effects of a Credible Shift to Tighter Monetary Policy
Output
Inflation
IA0
Y
AD1
AD0
•
0LRE
•
1LRE
IA1 •
• B
A