ECN 204 Lecture Notes - Lecture 4: Ais People, Canadian Dollar, Exchange Rate

• School: Ryerson University
• Department: Economics
• Course: ECN 204
• Professor: Khyati Antani

Document Summary

I=f(roi) investment expenditure depends on rate of interest (investment demand schedule) There is an inverse/negative relationship between investment and rate of interest. I nvestment expenditure: availability of resources (+, cost of resources (-, technology (+, future expectations (+, taxes and government regulations (-) Change in y/gdp = change in ae x (1/mps) The higher the increase in ae (aggregated expenditure), the higher the increase in gdp. The higher the mps , the lower the multiplier (-) Change in gdp > change in aggregated expenditure. If savings increase consumption decreases aggregated expenditure decreases. X (exports) injection increase in exports (x) increase in gdp. Exchange rate (er) : if the value of canadian dollar increases (appreciation) exports (x) decreases (-) Gdp of the rest of the world (row) (+) M (imports) leakage increase in imports (m) decrease in gdp. Exchange rate (er) if the value of canadian dollar increases (appreciation) imports (m) increase (+)