Capitolo 11

1. Capitolo 11 Prodotto, Occupazione e Prezzi

2. Fig. 11.01 Equilibrio generale Figure 11.1

3. Fig. 11.01 IS Equilibrium in the goods market Changes in output will occur when we are not on the IS curve (as response to shortage to the left of IS and surplus to the right). Interest rate Output Figure 11.1

4. Fig. 11.01 LM Equilibrium in the money market Changes in the interest rate will occur when we are not on the LM curve. Below LM there is an excess demand for money (bonds chase money). Above the LM there is an excess supply of money (money chases bonds). Interest rate Output Figure 11.1

5. Fig. 11.01 LM IS Y1 General equilibrium A Interest rate Output Figure 11.1

6. Fig. 11.02 Output and employment Figure 11.2

7. Fig. 11.02 A Real wage Labour Output Labour (a) Labour market Output and employment (b) Goods production Figure 11.2

8. Fig. 11.03 General equilibrium Figure 11.3

9. Fig. 11.03 Realwage Interestrate Employ-ment Output (a) (c) Output Output Desired demand Employ-ment (b) (d) Equilibriumin thegoods market Warning: the axes have been switched from the original 45° diagram! Figure 11.3

10. Fig. 11.03 Interestrate Interestrate Realmoney Output (c) (e) Pricelevel Realmoney (f) Money market equilibrium Figure 11.3

11. Fig. 11.03 Realwage Interestrate Interestrate Employ-ment Realmoney Output (a) (c) (e) Output Output Pricelevel Desired demand Employ-ment Realmoney (b) (d) (f) Now….general equilibrium! Figure 11.3

12. Fig. 11.04 The role of the price level Figure 11.4

13. Fig. 11.04 Realwage Interestrate Interestrate Employ-ment Realmoney Output (a) (c) (e) Pricelevel Output Output Desired demand Employ-ment Realmoney (b) (d) (f) Determining equilibrium Y and i Figure 11.4

14. Fig. 11.04 Realwage Interestrate Interestrate Employ-ment Realmoney Output (a) (c) (e) Pricelevel Output Output Desired demand Employ-ment Realmoney (b) (d) (f) What happens, if P is “too” high? Figure 11.4

15. Fig. 11.04 Realwage Interestrate Interestrate Employ-ment Realmoney Output (a) (c) (e) Pricelevel Output Output Desired demand Employ-ment Realmoney (b) (d) (f) With low output, P falls... Figure 11.4

16. Fig. 11.04 Realwage Interestrate Interestrate Employ-ment Realmoney Output (a) (c) (e) Pricelevel Output Output Desired demand Employ-ment Realmoney (b) (d) (f) When P´´ is “too low”... Figure 11.4

17. Fig. 11.05 Monetary neutrality Figure 11.5

18. Fig. 11.05 Realwage Interestrate Interestrate Employ-ment Realmoney Output (a) (c) (e) Output Output Pricelevel Desired demand Employ-ment Realmoney (b) (d) (f) Proportional changes in P and M. Figure 11.5

19. Fig. 11.06 Sticky price equilibrium Figure 11.6

20. Fig. 11.06 Realwage Interestrate Interestrate Employ-ment Realmoney Output (a) (c) (e) Pricelevel Output Output Desired demand Employ-ment Realmoney (b) (d) (f) Output for labour market equilibrium Figure 11.6

21. Fig. 11.06 Realwage Interestrate Interestrate Employ-ment Realmoney Output (a) (c) (e) Pricelevel Output Output Desired demand Employ-ment Realmoney (b) (d) (f) P is high, M/P is low and i is high. Figure 11.6

22. Fig. 11.06 Realwage Interestrate Interestrate Employ-ment Realmoney Output (a) (c) (e) Pricelevel Output Output Desired demand Employ-ment Realmoney (b) (d) (f) Low Y means low L too. Figure 11.6

23. Fig. 11.06 Realwage Interestrate Interestrate Employ-ment Realmoney Output (a) (c) (e) Pricelevel Output Output Desired demand Employ-ment Realmoney (b) (d) (f) MPL > w between C and D, e.g. B Figure 11.6

24. Fig. 11.07 Monetary neutrality failswhen the price level is fixed Figure 11.7

25. Fig. 11.07 LM IS LM´ A Interest rate A´ Output Monetary neutrality fails if the price level is fixed M/P will change with a changein M since P by assumption is fixed! Figure 11.7