ECON0016 Macroeconomics Term 1 Summary UCL 21/22

Demand-side


IDENTITY

AD et it g
cotayy terr tiotiyytirrtg
MARKETCLEARING

y AD

moneuinac

Heterogeneity differingconsumption although
goodisn'tanecessaryrequirement
in ourcase wetakea samplehouse
modelaggconsCe
Éche
PlH PERMANENTincomeHYPOTHESIS


Peopleoptimallyconsumebyallocatingresourcesovertheirlifetime

Max
Éftp.logcet st
If i Ceti
lifetimeutility Yee

t t
citrine i
Éf Yeti
resources

Eiffel
smallmpc
ce x yee notsensitiveto Ar


RESULTS


consumptionsmoothing


yet directlydeterminesCe
tempAy smallAc permAy 1 1 Ac

, HANDTOMOUTH



debt
saverepay




in
aborrow


P.intassumes nocreditconstraints




É




ce get i
Flye
ein
9 of Mee


MULTIPLIER



AyfromAz exogfactors
usuallyby
surprise



y cotcyll
tlytit ys.ci
lcotitgl


Htm nighmpc Pl H lowmpc

bigmultiplier smallmultiplier

nigha lows

, INVESTMENT

spendingongoodsthatyielda streamofutilitythroughfutureservices


Firmscaneitherinvestorpayoutdividends


Ielts al
theory


Max
Éc pestde tie satchel
Iv I tech
Pgift



DEP wet hell s tie


I t




mis me



Elt 11 81af h t 1
g i tr fi try

q



Sh It fork
M3 MC
MBcmc Eggiight tocatchup

, LEVERAGE at
empirical



firm'sstockmarketvalue
Q replacementcostof k


a 1 stockmarketsovervalued


Q weaknegative noeffectof on I I dependentoncashflow


can'tmeasurespecifier




animalspiritsmeanthatinvestorsusuallyactspontaneously

I mayonlybeweaklydependenton r
lessdependentondebt


iscurve


r




is
y
as rt er and in willy




scope shifts

r sensitivity 2 exogenousfactor
policyeffectiveness

C I multiplier