Saving ‘S’ I Taxation ‘T’ I Imports ‘M’ I W = S + T + M Aggregate Demand is sum of all the demand in the economy I AD is the total amount spend on goods in the economy I AD = C + J I AD = C + G + I + [X M] I Multiplier = 1/MPS = 1/1-MPC Interest Rates: increase in P, increase Demand, Increase interest rate, increase S, decrease AD Real Balance: increase P, increase S, Decrease AD Trade Balance: increase P, decrease X, increase M, decrease AD A Bank’s balance sheet is driven…
Words 3052 - Pages 13