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week#6 (IS CURVE (shift right (investment shift right (decrease in price…

- - - - government purchase increase (transfer payment/student loans etc)
        
        raise tax today (personal income/imports tax/corporate tax)
        
        the net effect will be a shift in the saving curve to the left
        
        lump sum tax in the current period is not entirely absorbed by a reduction of consumption in the current period, but rather it is smoothed out over the lifetime of the household.
        
        sell bond to finance today's expenditure and pay back debt in future
        
        no change to the incomes of households in the current period but reduce consumption
        
        households will reduce their consumption in the current period by the exact amount of the bond as they will anticipate the future increase in taxes when the bond matures
        
        Ricardian equivalence
        
        定义：such financing strategy would not lead to any change shift in saving curve as households would reduce their consumption to precisely offset the change in government expenditure
        
        if there exists no uncertainty and the prevailing interest rate then the present value of lifetime government income must equal the present return of lifetime government expenditure,表示政府应该平衡他们的budget
        
        因为政府要increase expenditure,但根据Ricardian equivalence要平衡income and expenditure. 所以raise tax 和 sell bond 是解决Ricardian equivalence 的方法。
        
        政府开支可能导致财政赤字，财政赤字引起saving curve shift left，further lead to current account deficit, which called twin deficit hypothesis
      - consumption increase
        
        increase in wealth or expected future income
        
        change in time preferences
    - - decrease in price of capital Pk
      - increase in production function from 科技 or labour utilization
      - decrease in depreciation rate