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Aggregate Expenditure

Aggregate Expenditure. New Keynesian Cross (Governs determination of the actual markup. Assumes PIH). C( N (Y,K,Z), λ )+I+G. 45 °. Y. Aggregate Expenditure. Equilibrium Output When I=0. C( N, λ )+G. 45 °. Y. Y. –. The Net Rental Rate Curve

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Aggregate Expenditure

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  1. Aggregate Expenditure New Keynesian Cross (Governs determination of the actual markup. Assumes PIH) C(N(Y,K,Z),λ)+I+G 45° Y

  2. Aggregate Expenditure Equilibrium Output When I=0 C(N,λ)+G 45° Y Y –

  3. The Net Rental Rate Curve (Adjusted for a Small Investment Smoothing Parameter j) r (dI/dt)e=0 ↕ r=[α/(1-α)](WN/K)(I/δK)-j –δ (dI/dt)e =0 N=N(Y,K,Z) W=–UN/UC = W(N(Y,K,Z),λ) r=0– (dI/dt)e >0 (dI/dt)e <0 Y Y – (I=0)

  4. r Short Run Equilibria MP dI/dt=0 r=0– –πe Y Y – (I=0)

  5. r Unexpected Monetary Contraction MP dI/dt=0 r=0– –π Y Y – (I=0)

  6. r Expected Deflation MP dI/dt=0 –π r=0– Y Y – (I=0)

  7. Rise in the Marginal Value of Wealth λ (Raising G Does Roughly the Reverse) r MP dI/dt=0 –π r=0– Y Y – (I=0)

  8. Beginning of Monetary Restoration (Eventual Recovery Expected) r MP dI/dt=0 –π r=0– Y Y – (I=0)

  9. Continued Monetary Restoration r MP dI/dt=0 –π r=0– Y Y – (I=0)

  10. r Completed Monetary Restoration MP dI/dt=0 • r=0– –π Y Y – (I=0)

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