Lectures in Macroeconomics- Charles W. Upton A Productivity Boost

The Y and M Curves P r Y M PoPo roro

A Productivity Boost The Y Curve P r Y M PoPo roro Pick any point on the Y curve. D Y =S Y

A Productivity Boost The Y Curve P r Y M PoPo roro Does the event mean D Y >S Y or D Y <S Y ? D Y =S Y

A Productivity Boost The Y Curve P r Y M PoPo roro Suppose D Y >S Y. To get back on the Y curve, the Auctioneer would have to raise r or P. Thus Y curve shifts up and to the right. D Y =S Y

A Productivity Boost The M Curve P r Y M PoPo roro Pick any point on the M curve. D M =S M

A Productivity Boost The M Curve P r Y M PoPo roro Does the event mean D M >S M or D M <S M ? D M =S M

A Productivity Boost The M Curve P r Y M PoPo roro D M =S M Suppose D M >S M. To get back on the M curve, the Auctioneer would have to raise r or lower P. Thus M curve shifts down and to the right.

A Productivity Boost The Productivity Surge Pick a point on the Y curve. P r Y M PoPo roro

A Productivity Boost The Productivity Surge Pick a point on the Y curve. D Y <S Y –GDP is up –Consumption rises by a fraction of the increase P r Y M PoPo roro D Y <S Y

A Productivity Boost The Productivity Surge Pick a point on the Y curve. D Y <S Y The Auctioneer must raise D Y P r Y M PoPo roro D Y <S Y

A Productivity Boost The Productivity Surge Pick a point on the Y curve. D Y <S Y The Auctioneer must raise D Y P r Y M PoPo roro D Y <S Y Memo to the auctioneer: To cut D Y, raise r To raise D Y lower r

A Productivity Boost The Productivity Surge Pick a point on the Y curve. D Y <S Y The Auctioneer must raise D Y P r Y M PoPo roro D Y <S Y

A Productivity Boost The Productivity Surge Pick a point on the Y curve. D Y <S Y The Auctioneer must raise D Y The Y curve shifts down and to the left. P r Y M PoPo roro D Y <S Y

A Productivity Boost The Productivity Surge Pick a point on the M curve. P r Y M PoPo roro

A Productivity Boost The Productivity Surge Pick a point on the M curve. D M >S M P r Y M PoPo roro

A Productivity Boost The Productivity Surge Pick a point on the M curve. D M >S M –Money demand Up P r Y M PoPo roro D M >S M

A Productivity Boost The Productivity Surge Pick a point on the M curve. D M >S M The Auctioneer must lower D M P r Y M PoPo roro D M >S M

A Productivity Boost The Productivity Surge Pick a point on the M curve. D M >S M The Auctioneer must lower D M P r Y M PoPo roro D M >S M

A Productivity Boost The Productivity Surge Pick a point on the M curve. D M >S M The Auctioneer must lower D M P r Y M PoPo roro D M >S M Memo to the auctioneer: To cut D M, raise r To raise D M lower r

A Productivity Boost The Productivity Surge Pick a point on the M curve. D M >S M The Auctioneer must lower D M P r Y M PoPo roro D M >S M

A Productivity Boost The Productivity Surge Pick a point on the M curve. D M >S M The Auctioneer must lower D M The M curve shifts down and to the right P r Y M PoPo roro D M >S M

A Productivity Boost The Productivity Surge The Y curve shifts down and to the left. The M curve shifts down and to right P r Y M PoPo roro

A Productivity Boost The Productivity Surge The Y curve shifts down and to the left. The M curve shifts down and to right P down Interest rate is uncertain. P r Y M PoPo roro

A Productivity Boost End ©2004 Charles W. Upton. All rights reserved