household sector

corporate sector

government departments

international department

It must be calculated regardless of whether the factors of production are located domestically.

GNP-Depreciation

NI=NNP-Indirect taxes-Enterprise transfer payments Government subsidies to enterprises

Personal disposable income Personal income tax

Income = output = consumption investment y = c i

consumption function

savings function

The relationship between consumption function and savings function

Other factors affecting consumption

equilibrium income

Savings and Investment Identity I=S

multiplication theory

investment needs

Savings and Investment Identity I=S (T-G)

Various multipliers in the three sectors

I=S (T-G) (M-X K)

Investment i = savings s

Keynesian view on interest rate determination

Determination of money demand

The slope of the LM curve

Changes in the LM curve

The intersection of the curves determines national income and the interest rate

price change effects

changes in government policy

Changes in foreign trade variables

Influencing factors

f(L,k)

The economic implications of different characteristics of the aggregate supply curve

The price effect of expanding aggregate demand policy is the largest, indicating that the aggregate supply curve is a long-term aggregate supply curve

Macroeconomic short-term goals: full employment and price stability

diminishing marginal consumption

Diminishing marginal efficiency of capital

liquidity preference

There is wage stickiness

Derived from normal labor market changes

Permanent technological upgrading or a decline in a country's competitiveness (a reduction in employment opportunities in its industry or region)

Wage rigidity is a source of structural undertakings

When GDP does not reach full employment

Total social demand>Total social supply

Rising costs of raw materials, wages, etc.

Excessive demand in certain sectors of the economy causes price increases, leading to overall price increases

menu cost

sole cost

tax distortions

It is beneficial to profit earners and floating income earners, but not beneficial to working class people who rely on fixed income to maintain their lives.

Benefit the creditor and disadvantage the debtor

Good for holders of physical wealth, bad for holders of monetary wealth

It is beneficial to the government, which is equivalent to the government imposing an inflation tax, and is not beneficial to ordinary people.

Tax cuts → Increase in disposable income of individuals and businesses → Stimulate consumption and investment → Increase production and employment

Expand government purchases and expand public facilities → expand private enterprise product sales → increase consumption

The price level rises→the money supply decreases→the interest rate increases

Automatic changes in taxes, automatic changes in transfer payments, Farm product price maintenance system (minimum price is higher than the equilibrium price)

Compensatory fiscal policy = alternating between expansionary and contractionary policies

There is a time lag, and the size of the multiplier is difficult to determine

budget deficit and budget surplus

Use budget deficits and budget surpluses according to countercyclical needs

ways to make up for the deficit

Public debt/government needs to repay principal and interest

Central tax, local tax, central and local shared tax

The flatter the IS curve, the more obvious the crowding-out effect caused by rising interest rates.

The steeper the LM slope → the less responsive money demand is to interest rates → an increase in government spending → Rising interest rates → squeeze out more private companies

Factors affecting the extrusion effect P505

Increase money supply → lower interest rates → stimulate private investment

Increase money supply → support enterprises to expand investment → stimulate consumption → increase production and employment

Increase the statutory reserve ratio and lower the discount rate

The higher the statutory reserve ratio, the more difficult it is for commercial bank deposits to create balances

Money creation index is proportional to initial deposits

Money that can be created = money creation index × initial deposit amount

The higher the market loan rate, the more bank balances are unwilling to keep excess reserves.

The rediscount rate rises → the cost of borrowing money from the central bank for commercial banks rises → commercial banks keep more reserves, but the overall reserves decrease → the money supply decreases

The central bank purchases bonds from the public and bond prices increase

1. Rediscount rate policy (interest rate for commercial banks to borrow money from the central bank)

2. Open market business (buying and selling government bonds)

3. Change the statutory reserve ratio (increase the money supply → reduce the statutory reserve ratio)

The inflation rate is high, and the bank’s interest rate on account deposits is high.

If the IS is flat, the policy effect will be better

If LM is flat, the policy effect is better

The economy is prosperous in order to curb inflation, and the effect of monetary tightening is more obvious.

The expansion effect is not significant during depression

To increase or decrease the money supply, the velocity of money circulation must remain unchanged.

There is a time lag, once the effect is strong

Affected by international currency circulation, the local currency appreciates → the central bank buys foreign currency and sells the local currency → increases the supply of local currency

Within the Keynesian zone, fiscal policy is effective; In the classical region, monetary policy is effective

Extraordinary monetary tightening

Expand fiscal and monetary expansion

Expand fiscal policy and tighten monetary policy

tight fiscal tight monetary tightness

Tight finance, loose money

Tight finance, loose money