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NOTATION: Macroeconomic Systems
Any variable with a bar (or overline) over it indicates a fixed variable or a variable that is determined
outside the model. That is said to be exogenous to the model. All other variables are determined or
solved within the model and are said to be endogenous.
Delta, Δ, indicates a change or a marginal change in a variable. Typically an increase in the value of the
variable.
Chapter 2
Production function defined
Y
Out put of goods; identically equal to real income
N
Quantity of labour
K
Capital
the bar indicates that Capital is fixed outside the system (or is exogenous)
Goods market
Y
as above but also represents the supply function of the goods market
Y
identically equal to consumption and savings
C
consumption
I
investment
S
savings
Labour market
demand for labour services
Nd
supply of labour services
Ns
Bonds market
demand for bonds
Bd
supply of bonds
Bs
Money market
demand for money
Md
Ms
fixed supply of money
supply of money
Chapter 4
R
M
V
T
P
Ms
market rate of interest
fixed stock of money
velocity of circulation of money
Fixed velocity of circulation
total volume of transactions but only in early part of Chapter 4
aggregate price level
money supply
T
G
W
W/P
MPN
IS
LM
kPY
fixed supply of money
taxes
government expenditure
money wages
real wages
marginal product of labour
investment - savings curve (in a simplified model)
liquidity preference - money supply curve (in a simplified model)
k is a constant, P is price and Y is output; this defines the money supply
NOTATION: Macroeconomic Systems Continued
Chapter 5
AD
Y
aggregate demand
identically equal to consumption + savings + taxes
also identically equal to consumption investment and government expenditure
C
S
T
I
G
R
C
G
IS
LM
kPY
consumption
savings
taxes
investment
government expenditure
interest rate
coupon value (only in later part of chapter 5)
capital gain (only in later part of chapter 5)
investment - savings curve (in a simplified model)
liquidity preference - money supply curve (in a simplified model)
k is a constant, P is price and Y is output; this defines the fixed stock of money
(money supply)
money wages
fixed money wages
W
Chapter 6
AS
aggregate supply
A
A/P
money value of wealth
real value of wealth
W
M
B
total stock of wealth
held either in interest bearing bonds
or cash balances
H
U
represents people's tastes and preferences
utility
Chapter 7
Chapter 8
Chapter 9
Chapter 10
An
PVn
NPV
Gs
In
Ct
annual expenditure or cash outflows at time n
annual cash inflows at time n
present value of cash flows n
net present value
capital goods supply
net investment
cost at time t
Chapter 11
T
total volume of transactions
W
wealth
Other variables are uniquely defined within this Chapter
NOTATION: Macroeconomic Systems Continued
Chapter 12
D
deposits
currency held by the public
Cm
deposits with commercial banks
Dm
R
interest rate
required reserves of commercial banks
Rr
Other variables are uniquely defined within this chapter
Chapter 13
C
consumption
A
autonomous expenditures such as government expenditure
P
prices
T
taxation
I
investment
G
government expenditures
X
exports
IM
imports
Other variables are uniquely defined within this chapter
Chapter 14
X
V
U
MPN
MC
growth rate of real wages
excess demand for labour
number of vacancies filled
number unemployed
marginal physical product of labour
marginal cost
Chapter 14 Appendix
Other variables are uniquely defined within this appendix
Chapter 15
Other variables are uniquely defined within this chapter
Chapter 16
Ex
Eo
X
O
B
E
CA
R
BP
elasticity of demand for exports
elasticity of demand for IMPORTS
exports
imports
balance of trade
domestic expenditure
real net capital inflow
domestic interest rate
balance of payments
Chapter 17
b
marginal propensity to consume
MPC
marginal propensity to consume (computer simulation)
equilibrium at time t
Et
Other variables are uniquely defined within this chapter and its appendices; and within the
computer simulation models