EC140 Lecture Notes - Lecture 6: International Trade, Consumption Function, Expenditure Function
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EC140 Full Course Notes
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Ec140 class 6 adding government and trade chapter 22. In our simple macro model w/ govt when t = (0. 2)y if national income increases by , net tax revenue increases by sh. 20. Purchase goods/services, g this is assumed to be autonomous w/ respect to income. Net tax revenues = taxes collected transfer payments. If t g > 0, we have a surplus. If t g < 0, we have a deficit. Exports are determined by foreign households and firms. Federal structure in canada implies multiple levels of govt. Model assumes all levels of govt included in t and g. Exports, x, are autonomous w/ respect to canadian income. Decr x (shift down), incr im (rotates u) Incr x (shift up), decr im (rotate down) Increase in foreign income shift x up. Decrease in foreign income shift x down. Net exports fall as income increases traded deficit: imports > exports. Various factors will lead to shifts i(cid:374) the (cid:374)et export f"(cid:374)