Download Y 2

Short-Run Equilibrium for an Open Economy:
Putting the DD and AA Schedules Together
Figure 16-9: How the Economy Reaches Its Short-Run Equilibrium
Exchange
Rate, E
DD
E2
E3
2
3
1
E1
AA
Y1
Copyright © 2003 Pearson Education, Inc.
Output, Y
Slide 16-1
學習經濟模型五步驟
模型目的。
內生變數：決定模型兩軸。
行為法則：畫出模型曲線。
均衡：決定均衡之內生變數。
外生衝擊
• 判斷是否為外生變數改變？
• 判斷此外生變數之改變將影響哪些行為法則？
• 判斷此外生變數之改變造成行為法則何種影響？
Copyright © 2003 Pearson Education, Inc.
Slide 16-2
Temporary Changes
in Monetary and Fiscal Policy
 Two types of government policy:
• Monetary policy
– It works through changes in the money supply.
• Fiscal policy
– It works through changes in government spending or
taxes.
• Temporary policy shifts are those that the public
expects to be reversed in the near future and do not
affect the long-run expected exchange rate.
• Assume that policy shifts do not influence the foreign
interest rate and the foreign price level.
Copyright © 2003 Pearson Education, Inc.
Slide 16-3
Temporary Changes
in Monetary and Fiscal Policy
Figure 16-10: Effects of a Temporary Increase in the Money Supply
Exchange
Rate, E
DD
3 說明
E3
2
E2
1
E1
AA2
AA1
Y1
Copyright © 2003 Pearson Education, Inc.
Y2
Output, Y
Slide 16-4
Temporary Changes
in Monetary and Fiscal Policy
Figure 16-10: Effects of a Temporary Increase in the Money Supply
Exchange
Rate, E
DD
3 說明
E3
2
E2
1
E1
AA2
AA1
Y1
Copyright © 2003 Pearson Education, Inc.
Y2
Output, Y
Slide 16-6
Temporary Changes
in Monetary and Fiscal Policy
 Monetary Policy
• An increase in money supply (i.e., expansionary
monetary policy) raises the economy’s output.
– The increase in money supply creates an excess supply
of money, which lowers the home interest rate.
– As a result, the domestic currency must depreciate (i.e., home
products become cheaper relative to foreign products) and
aggregate demand increases.
Copyright © 2003 Pearson Education, Inc.
Slide 16-7
Temporary Changes
in Monetary and Fiscal Policy
Figure 16-11: Effects of a Temporary Fiscal Expansion
Exchange
Rate, E
DD1
DD2
1
3
E1
說明
2
E2
AA
Y1
Copyright © 2003 Pearson Education, Inc.
Y2
Output, Y
Slide 16-8
Temporary Changes
in Monetary and Fiscal Policy
Figure 16-11: Effects of a Temporary Fiscal Expansion
Exchange
Rate, E
DD1
DD2
1
3
E1
說明
2
E2
AA
Y1
Copyright © 2003 Pearson Education, Inc.
Y2
Output, Y
Slide 16-10
Temporary Changes
in Monetary and Fiscal Policy
 Fiscal Policy
• An increase in government spending, a cut in taxes, or
some combination of the two (i.e, expansionary fiscal
policy) raises output.
– The increase in output raises the transactions demand
for real money holdings, which in turn increases the
home interest rate.
– As a result, the domestic currency must appreciate.
Copyright © 2003 Pearson Education, Inc.
Slide 16-11
Temporary Changes
in Monetary and Fiscal Policy
 Policies to Maintain Full Employment
• Temporary disturbances that lead to recession can be
offset through expansionary monetary or fiscal policies.
– Temporary disturbances that lead to overemployment
can be offset through contractionary monetary or fiscal
policies.
Copyright © 2003 Pearson Education, Inc.
Slide 16-12
Temporary Changes
in Monetary and Fiscal Policy
Figure 16-12: Maintaining Full Employment After a Temporary Fall in
World Demand for Domestic Products
Exchange
Rate, E
DD2
G (T )
DD1
2
E2
1
E1
AA1
Y2
Copyright © 2003 Pearson Education, Inc.
Yf
Output, Y
Slide 16-13
Temporary Changes
in Monetary and Fiscal Policy
Figure 16-12: Maintaining Full Employment After a Temporary Fall in
World Demand for Domestic Products
Exchange
Rate, E
DD2
DD1
E3
3
2
E2
AA2
1
E1
MS
AA1
Y2
Copyright © 2003 Pearson Education, Inc.
Yf
Output, Y
Slide 16-14
Temporary Changes
in Monetary and Fiscal Policy
Figure 16-13: Policies to Maintain Full Employment After
a Money-Demand Increase
Exchange
Rate, E
DD1
E1
1
2
E2
AA1
MS
AA2
Y2
Copyright © 2003 Pearson Education, Inc.
Yf
Output, Y
Slide 16-15
Temporary Changes
in Monetary and Fiscal Policy
Figure 16-13: Policies to Maintain Full Employment After
a Money-Demand Increase
Exchange
Rate, E
DD1
DD2
G (T )
E1
1
2
E2
AA1
3
E3
AA2
Y2
Copyright © 2003 Pearson Education, Inc.
Yf
Output, Y
Slide 16-16