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Q. What do you mean by Capital Flows?
With free capital flows, this is a very unreasonable assumption. If we domestic interest rate increase against the foreign interest rates, capital will flow into our country that would drive down the domestic interest rate again.
Most reasonable models in that domestic interest rate is affected by foreign interest rates are more complicated. To understand such models, you should first understand models where this complication doesn't arise. Additionally predictions from models where domestic interest rate isn't affected by foreign interest rates are fairly similar to more realistic models which allows for capital flows.
Importance of macroeconomics models Using the models we can, for example, analyze what happens when the government increases consumption, when the central bank increases the tar
Once Y is determined, almost all of the other variables are determined since they are either exogenous or they depend on Y. From Y we can determine C by consumption function, I m
what are the advantages and disadvantages of a national income and green GDP? national income figures are often used to compare living standards across countries and through time.
What isn''t a component of the M1 money supply?
The LM curve with inflation We know that LM curve will shift upwards when P increases (presuming MS is constant). This is still true though we can also add that LM curve glid
Suppose the consumption function is C = $500 billion + 0.55Y and the government wants to stimulate the economy. By how much will aggregate demand at current prices shift initially
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Q. Show the investment function in the IS-LM model? The investment function in the IS-LM model Investment was an exogenous variable in cross model owing to the fact that
differentiate among the theory of external trade
why and how is price level determined by the monetary sector in the classical model?
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