EC140 Lecture Notes - Lecture 18: Core Inflation, Potential Output, Macroeconomic Model
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EC140 Full Course Notes
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The cdn economy start in lr equilibrium, there is a large reduction the rpice of oil which is both an input to production and a key output in the cdn economy. Gdp is uncertain and decrease the price level. A = c + i + g + x. Y/ a = simple multiplier = 1/(1-z) z = mpspend. Fluctuations of int rate is why core inflation has been steady at 2% target monetary policy is working. When inventories shrink, companies increase more and vice versa. Simple multiplier changes autonomous expenditure (shifts ae down) which changes income. The cad depreciates in value relative to the usd, therefore ae decreases. Chapter 23 changes in price level change ae which generates ad curve. As curve tells us how much companies want to produce. Y* = potential = lr income = how much economy can produce at normal capacity.
