ECN 301 Lecture Notes - Lecture 7: 1978 Atlantic Hurricane Season, Supply Shock, Demand Curve
4 Jan 2018
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Is: investment-savings: goods market, lm: liquidity-money, money/asset market, fe: full employment. It only reduces current output not any other factor that could shift the is curve: a temporary adverse supply shock has no direct effect on the demand for, or the supply of money. Labour market: fe line shifts to the left, goods market. Fall 2017: which market adjusts the fastest, the labour market (fe line): slowest to adjust, matching of jobs to workers takes time, wages are renegotiated periodically, the asset market (lm curve): quickest to adjust. Lm curve shifts until it passes through the intersection of the fe line and the is curve. The lm curve will shift down, the interest rate drops. Why: does the is curve of fe line shift, factors that shift the is curve, expected future output, wealth, government spending/taxes, expected marginal productivity of capital in the future, factors that shift the fe line: Is curve shifts up and interest rate increases.
