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(2) Macro S1 - Elisa - Coggle Diagram
(2) Macro S1 - Elisa
:pencil2: Short term equilibrium
get y from AD
make graph of the AD
get R from IS or LM
get Nd from production function
Get unemployment from Ns function
Get AS in ST
from prod function Y / TC=WN/ PPC so p=Mc / find Mc /equalise to p / solve for Y
Get labour demand
replaced with Ys from AS
mechanism : if real wage increase - cost increases - so labour demand from firm will decrease
(1) ST- MT - LT changes
Price in ST and MT
ST: prices are fixed
graph: relationship between P and Y - AS horizontal
MT: prices change
For what is the reason?
What is the link with P and y? (link and AS graph)
3 time frames -
what is fixed and not (P, W, R)
:pencil2:
get AS in the short term
from the production function / using PPC condition / find Ys at the end that depends on P / (graph)
Labour demand in Short term
Both fixed factors so fixed
Graph in the short term
know all the big graph (Nothing changes)
:pencil2:MT equilibrium
get new p from equalising AS and AD
examine how how p changes
Expect : P now flexible - we want Nd to increase
find R from IS or LM
no P in IS but in LM says that is R decrease P increase
Get Nd : calculate from replace in Labour demand function - should be higher than in ST
(2) ST - MT - LT graph
AS - AD : only AS change
IS - LM : only effect on LM because no P in IS
y and N curve in only in ST
(3) Securities market - BB curve
Actors in Bonds market - who's responsible for the supply of bonds ? and for the demand of bonds?
How does R impact SB and DB?
How does R impact price of Bonds?
impact on in i and g so impact on y
Graph of increase of R on B/P
2 curves : 1 upwards sloping - demand for bonds - downwards sloping: supply of bonds
Graph DB and SB
Case 1: SB increase
SB curve (downards sloping shift to right) - R up
R up - Price of bonds higher - y up
BB curve upwards ( positive relationship with R and B )
Case 2: DB increase
DB curve (upwards sloping shift to right) - R down
R down - more demand on Bonds - price of bonds higher - y increases
BB downwards sloping ( negative relationship with R and B )
Demand of Bonds depend on level of R
Case 3: both DB and SB increase
DB and SB shift right - R fixed
R fixed - B up - y up
BB curve horizontal
:pencil2: Get IS, LM then AD equation
state 2 factors (P and y)
Long run :warning: