Date.
Lecture 1: Intoduction the dimand side: PZH
= Overview
-Detinitivn of Aggregah Demend LAD)
•AD Cy°) reters to the ,eal expenditure on goods andrervicas produиd
in the home country lelonomy
"t is furdamuatelly forwardilooking as spending decisiuas by all
agents depend on expectations of futore mcom,costs and diraw.
•AO equetion lUpen Elemomy) y0= Ct I+ G XX M
in lunsumption (() - household spending on goods andsewias
13 Javestment UI) = spending by lims on machung,equiprust, newbuldng
io Giv spendiny (G) - gou expendilvie on goods and sermas ley. schools
io Net exports (X-M)- Expord (XJ minus Imports (т)
Key dilterena : I riters to the creation of nencapital. Purchesing
existing assets Clike recond hond factory or compony stores) is a
transter of owaeship inot part of AD as no new pruductim inalied
- Elonomic Fluctuotioas & Busiruss rycle
• Supply side doas economgs prodnlive capauily, dimand side
with aylaing
Pluctuaticas oronnd the teand grouth rab
.Shocks: sudden collepse in AD lead to rACUSsIon
6o 2008-04 Finencial fusis laegotis shock to globul spending!
b 2020 Cavrd-19 (mandoed luckdown + social distuacing = {AD)
Chonges in output ly) had to changes in employmeat.
i entput larger wage bill and i prulit
Thes oulgut ond lntems are treated as synenymons in this mod
- Polcy tools : peleymalars use two moin lovers to intwna y
y? ond slabilve
tunony against unemployment and intlativn
1). Mone lary Policg : adjusting ineast rous
•import on I: Ir 7 deust of tinancing
encuuroge fimsCca's,
inuest npijer
o
"impact on C: iris Tincathe to save pad borow ing castfor daobh T-21
DFiseal Poliry : thanging uvel of gurt spendien () or changing taxciton
o. transter puy muats bnemplsymeat bestils ,persieas). This
in thesnd howsehold disposobh Inom, whion shitts с
,Date.
Why Forecart Demand?
•busrnesser: plon prodacticn, hising end inust
" Housetald : plon sprading
•Cout: estimede dox vevenue ond tutue requrements for sooa spem
• untal bank dride wtuthe to cut orcaile rab,
5 Fuct obual dimond side ond business gle
- lompusiticn of hDP
• GDPLy) is the nationul account meosuies total oufpnt. Dttewnuing, dift wergн
Cunsumption CC) wivally lorgest componint (50-70% Gne)
Inwstmunt 7) varies heavily by county CU8- 17%, Chind -457)
Net Expords (X-M) : Couaties lila Gumany and Chind run trade surphas
whilk US &UK un tride deticits
- NoticaRl outet con be calaleted in 3 wogs. Becone ot how they a
ditined, they are idintilies C=) meoning equol by dit
1).EApendetar Mithod -used for dimond side modellang. Hsong totel spind in fio
gorry
y= C111 G+(х-и
• unly lncludes guit purchose of guds Isemes. ecludes trunster. becaw
those are imcludid in C whin thay spond then
By conventiin, only w heusing cwned as investoeat for heussbulde
Otler durobu (as,fuintual clussitrid as consumptien
[2) Vulur added Muthid -focus on praductiur stag
=
y= vale ot output seld- cost ot ilmudiate guods & cowmaln
3) Tnumu mithid forus on distibrtis efhr
ys sularids ot lebour t protts of the captal ourers
10x ev
Noti: Whie these shiald be equel idiscreponces arse on real dota duto sinpy oom
bluch ma
- Relative volatikty
•I is dpends on oplimnism and experled later prehds
mast velatile as il
Films Cm earily dilay building fustrry durng ussion,hat hessheld cor'tstept
. C& G sg mod stube hon n
Eudumistsgrorthrae
constant othn plet the log ot real GDP. A staght line on a loysinlk indicals
, Date.
=7 IS (oNe
- The IS cuve (trestmuet- Sowigs) represent the goods maikit equilibiv
It shows all combinetious of the interest rote Cu) ond output ly) where
AD lie spendng) in the eanomy equal to output.
- It is a core componert of the B equation model CIS luie, Phillip, Mwlay ld
- Shous how oulput changes folloming shucks to spending.contidinu, inet a
- Pactors altecting pruate seclor AD
strory ode bork soplm
1) Expetaton of tulure Frin look at futore post tox pretil unalaraty Idemaa
Hastuoled louk at lieregdle inaond a ngt waimplignandan lderd
sary
Lite eyele motive for souings rxtersto deaarg otsaving es the person
tuks into acc the prjecld patura ot ot income durng therr wardng
lite and retivement
2) the e,lint of cedd constaints olus when bank limits lending dr to lack tiate
os collahial leg.hovse pros) ~s lonse,
nleuset
tigen7
cuastrrint
Tato problem requies Icllotieal for loon 319
tighen Iielux canstranats
3)
The imlirest roll For househould : ir i sarmgs! censerptun sapstilutin ere
Por Filoms: T borsoning tor capilal inititmuat rincie
For ceditos Idobto houhold: i- incomT-c for caedito,
i. Substitutun ond nom ethect stroager for dibtur thon acrme for credlie
thus i ods to lussociaed with pistponed consumpetico
-Diegrom ot 25 culse
Iplerest rale
The Is uive is downwad slopinsg, retlieling inneHL 15
A
High beluen imbrest vate and wulput
•High intusst rate LA): T borswing costs mill
ini satets
in housing and machrey 7LAD -7 lou outpnt lom dens
Outp
lowoutw high
lowintst nte (B)il borsowing eusts 7 buogent spenday
on duraes and copital- highe лar higher votpatá
non
• Movemeal aliny the (wise cavied by shange in the iabrest rate
Cecogenur,1
•Shitt of Is Cure caured by ono ethe fuctors othir then intred ihe
L letH liawerd shitt) - pessimiskc expectefroes, iunartainty, IgoutSperdas
b Ligh Contand) optimiste expectations, i house pre (' colloliral), G
Lecture 1: Intoduction the dimand side: PZH
= Overview
-Detinitivn of Aggregah Demend LAD)
•AD Cy°) reters to the ,eal expenditure on goods andrervicas produиd
in the home country lelonomy
"t is furdamuatelly forwardilooking as spending decisiuas by all
agents depend on expectations of futore mcom,costs and diraw.
•AO equetion lUpen Elemomy) y0= Ct I+ G XX M
in lunsumption (() - household spending on goods andsewias
13 Javestment UI) = spending by lims on machung,equiprust, newbuldng
io Giv spendiny (G) - gou expendilvie on goods and sermas ley. schools
io Net exports (X-M)- Expord (XJ minus Imports (т)
Key dilterena : I riters to the creation of nencapital. Purchesing
existing assets Clike recond hond factory or compony stores) is a
transter of owaeship inot part of AD as no new pruductim inalied
- Elonomic Fluctuotioas & Busiruss rycle
• Supply side doas economgs prodnlive capauily, dimand side
with aylaing
Pluctuaticas oronnd the teand grouth rab
.Shocks: sudden collepse in AD lead to rACUSsIon
6o 2008-04 Finencial fusis laegotis shock to globul spending!
b 2020 Cavrd-19 (mandoed luckdown + social distuacing = {AD)
Chonges in output ly) had to changes in employmeat.
i entput larger wage bill and i prulit
Thes oulgut ond lntems are treated as synenymons in this mod
- Polcy tools : peleymalars use two moin lovers to intwna y
y? ond slabilve
tunony against unemployment and intlativn
1). Mone lary Policg : adjusting ineast rous
•import on I: Ir 7 deust of tinancing
encuuroge fimsCca's,
inuest npijer
o
"impact on C: iris Tincathe to save pad borow ing castfor daobh T-21
DFiseal Poliry : thanging uvel of gurt spendien () or changing taxciton
o. transter puy muats bnemplsymeat bestils ,persieas). This
in thesnd howsehold disposobh Inom, whion shitts с
,Date.
Why Forecart Demand?
•busrnesser: plon prodacticn, hising end inust
" Housetald : plon sprading
•Cout: estimede dox vevenue ond tutue requrements for sooa spem
• untal bank dride wtuthe to cut orcaile rab,
5 Fuct obual dimond side ond business gle
- lompusiticn of hDP
• GDPLy) is the nationul account meosuies total oufpnt. Dttewnuing, dift wergн
Cunsumption CC) wivally lorgest componint (50-70% Gne)
Inwstmunt 7) varies heavily by county CU8- 17%, Chind -457)
Net Expords (X-M) : Couaties lila Gumany and Chind run trade surphas
whilk US &UK un tride deticits
- NoticaRl outet con be calaleted in 3 wogs. Becone ot how they a
ditined, they are idintilies C=) meoning equol by dit
1).EApendetar Mithod -used for dimond side modellang. Hsong totel spind in fio
gorry
y= C111 G+(х-и
• unly lncludes guit purchose of guds Isemes. ecludes trunster. becaw
those are imcludid in C whin thay spond then
By conventiin, only w heusing cwned as investoeat for heussbulde
Otler durobu (as,fuintual clussitrid as consumptien
[2) Vulur added Muthid -focus on praductiur stag
=
y= vale ot output seld- cost ot ilmudiate guods & cowmaln
3) Tnumu mithid forus on distibrtis efhr
ys sularids ot lebour t protts of the captal ourers
10x ev
Noti: Whie these shiald be equel idiscreponces arse on real dota duto sinpy oom
bluch ma
- Relative volatikty
•I is dpends on oplimnism and experled later prehds
mast velatile as il
Films Cm earily dilay building fustrry durng ussion,hat hessheld cor'tstept
. C& G sg mod stube hon n
Eudumistsgrorthrae
constant othn plet the log ot real GDP. A staght line on a loysinlk indicals
, Date.
=7 IS (oNe
- The IS cuve (trestmuet- Sowigs) represent the goods maikit equilibiv
It shows all combinetious of the interest rote Cu) ond output ly) where
AD lie spendng) in the eanomy equal to output.
- It is a core componert of the B equation model CIS luie, Phillip, Mwlay ld
- Shous how oulput changes folloming shucks to spending.contidinu, inet a
- Pactors altecting pruate seclor AD
strory ode bork soplm
1) Expetaton of tulure Frin look at futore post tox pretil unalaraty Idemaa
Hastuoled louk at lieregdle inaond a ngt waimplignandan lderd
sary
Lite eyele motive for souings rxtersto deaarg otsaving es the person
tuks into acc the prjecld patura ot ot income durng therr wardng
lite and retivement
2) the e,lint of cedd constaints olus when bank limits lending dr to lack tiate
os collahial leg.hovse pros) ~s lonse,
nleuset
tigen7
cuastrrint
Tato problem requies Icllotieal for loon 319
tighen Iielux canstranats
3)
The imlirest roll For househould : ir i sarmgs! censerptun sapstilutin ere
Por Filoms: T borsoning tor capilal inititmuat rincie
For ceditos Idobto houhold: i- incomT-c for caedito,
i. Substitutun ond nom ethect stroager for dibtur thon acrme for credlie
thus i ods to lussociaed with pistponed consumpetico
-Diegrom ot 25 culse
Iplerest rale
The Is uive is downwad slopinsg, retlieling inneHL 15
A
High beluen imbrest vate and wulput
•High intusst rate LA): T borswing costs mill
ini satets
in housing and machrey 7LAD -7 lou outpnt lom dens
Outp
lowoutw high
lowintst nte (B)il borsowing eusts 7 buogent spenday
on duraes and copital- highe лar higher votpatá
non
• Movemeal aliny the (wise cavied by shange in the iabrest rate
Cecogenur,1
•Shitt of Is Cure caured by ono ethe fuctors othir then intred ihe
L letH liawerd shitt) - pessimiskc expectefroes, iunartainty, IgoutSperdas
b Ligh Contand) optimiste expectations, i house pre (' colloliral), G
