General Equilibrium Conditions In The Classical Model

Submitted By cs3101

Words: 1862

Pages: 8

Open Document

Intermediate Macro Economics (W3213)
Prof Xavier Sala-i-Martin
Chapter 6
6.1 General Equilibrium
General Equilibrium Conditions in the Classical Model
We have seen THREE markets so far: Cookies (Goods), Bonds and Money.
We will assume that the prices of our model (namely, the real interest rate and the price level) adjust to clear the three markets: real market, bond market and money market.
Equilibrium in each market would mean:
(a) Yst (r,...) = Ydt (r,...) [Goods Market clearing condition]
(b) Bt=0 [Bond Market clearing Condition]
(c) Mst=Mdt=PL(R,Y,ψ) [Money Market Clearing Condition]
Recall from Microeconomic Theory that the price of artichokes moves to clear the artichoke market. The price of bananas moves to clear the banana market. Following this reasoning, how can we think of TWO PRICES (r and P) clearing THREE MARKETS simultaneously? (In mathematical terms, there are THREE EQUATIONS and TWO UNKNOWNS. So it appears that we cannot solve this system. This seems to be a big problem. Luckily, Leon Walras developed a theorem that will help us in this regard.
6.2 Walras’s Law
If IBC of a family holds,

Econ study guide Essay

nothing free. Not about just monetary. Time is also value of forgone opportunities. e. Impersonal/Tacit knowledge: impersonal system. It works if were impersonal. Think about themselves, if they weren’t it would be a failure. Unique to all of us and guides the price system. f. Why does no specific person dictate prices: it’s a way for people to meet in a market in an efficient way 3. Wealth and Value a. Money represents purchasing power b. Puts a value to everything c. Signal d. Unifying principle…

Words 469 - Pages 2

Econ study guide Essay

ECON160 Fall 2013: Topical Review for Second Midterm (Ch 5, 6, 7, 13, 14) The following is a general guide to the material we have covered since the first midterm. It is not necessarily definitive. 1. Elasticity and its Applications. (Chapter 5) A. Defined the Price elasticity of Demand Derived the calculation for an unbiased estimate of Elasticity. B Defined degrees of elasticity: elastic, unitary elastic, inelastic Analyzed the effects on total revenue of changes…

Words 419 - Pages 2

Econ Study Guide Essay example

economics and scarcity; - Economics is the study of how people, businesses, governments, and other organizations make choices when there is scarcity. Scarcity means that the resources we use to produce goods and services are limited. consequences of scarcity; -Since human wants are unlimited, the trade-offs associated with making choices: • You have a limited amount of time. If you take a part-time job, each hour on the job means one less hour for study or play. • A city has a limited amount…

Words 4821 - Pages 20

Essay Econ Exam Study Guide #3

Chapter 10 ~Y(GDP) = C(consumption) + Ig(gross investment) + G(government purchases) + Xn (Net exports) GDP Equation is an “Identity If household only sector GDP=Y=C ~DI(disposable income)= C(consume)+S(save)…

Words 849 - Pages 4

Essay about Econ 2 Study Guide

Chapter 9 Perfect Competition Easy entry/ exit Many firms Homogenous products Price taker No adv. Shift in supply curve Price taker- a firm that can alter its rate of production and sale without significantly affecting the market price. Shutdown condition: P ≥ AVC continue; P< AVC shutdown Chapter 10 Monopoly Absolute Barriers One firm No close substitues Price maker Adv. For new product/ public relations No shift Interdependence- mutual dependence between things Chapter 11 Monopolistic Competition…

Words 306 - Pages 2

Economics: Economics and Long Term Expenses Essay

+ Basic Economic Ideas Lydia King +Economic Choices  What is economics? : Economics is the study of how we make decisions when resources are limited. It has been called “ the science of decision making”.  We have to make economic choices when faced with needs (things we need for survival), and wants (things we want but don’t need for survival). When making economic choices, it is important to be fiscally responsible- not spending more than you earn.  For example, an economic choice would…

Words 420 - Pages 2

Study Guide for EC301 Essay

Study Guide for EC301 Your final exam consists of 34 multiple choice questions and three problems. I have listed below an example of what your exam will look like. This is your final exam. Good luck on your final. You just need to study these questions and you will do well on your final exam. Tom Econ 301 Intermediate Macroeconomics Study Guide, Professor Thomas Hiestand, Park University Online, Final Exam (Weight 300 Points) ______________________________ Multiple choice Questions…

Words 741 - Pages 3

pharmacoeconomic Essay examples

Abstract Objective This article provides a systematic and critical review of the evolving methods and applications of value of information (VOI) in academia and practice and discusses where future research needs to be directed. Methods Published VOI studies were identiﬁed by conducting a computerized search on Scopus and ISI Web of Science from…

Words 14233 - Pages 57

History Of Casinos

decor is also about setting a mood and casino managers take that very seriously. Many casinos, especially the bigger ones, have elaborate themes and everything within the walls reflect that theme. Overall, the building will be set up in a way that guides the guest back towards the casino floor. Large hallways will end up at the gaming tables, buffets and shopping areas will be located near the gaming area. In some casinos, the price structure of amenities will direct guests back to the playing floor…

Words 1582 - Pages 7

Essay on Finance: Economics and Macro Model Class

ECON 1202.2J PRINCIPLES OF ECONOMICS: MACRO Winter 2012 Program Learning Objectives: The learning goals of the Bachelor of Commerce program are communication, information literacy, critical thinking, team work, and ethics and social responsibility. These are explained in detail on our website (http://www.sobey.smu.ca/programs/bcomm/program.html). The learning objectives for this course are: Communication Prepare professional written reports/assignments Prepare and deliver professional…

Words 698 - Pages 3