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Ekonomi Moneter 2: - Literatur: Ekonomi Uang, Perbankan, Dan Pasar Keuangan Frederic S. Mishkin Edisi 9

The document discusses the IS-LM model and its key components. It explains the determination of aggregate output using the Y=C+I+G+NX model and defines the consumption function. It also covers investment spending, the expenditure multiplier, and how autonomous spending can impact output. The roles of government and international trade are explained. Finally, it describes the IS and LM curves and how their intersection determines equilibrium in goods and money markets.

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Afrian Yuzhar Fadhila
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43 views27 pages

Ekonomi Moneter 2: - Literatur: Ekonomi Uang, Perbankan, Dan Pasar Keuangan Frederic S. Mishkin Edisi 9

The document discusses the IS-LM model and its key components. It explains the determination of aggregate output using the Y=C+I+G+NX model and defines the consumption function. It also covers investment spending, the expenditure multiplier, and how autonomous spending can impact output. The roles of government and international trade are explained. Finally, it describes the IS and LM curves and how their intersection determines equilibrium in goods and money markets.

Uploaded by

Afrian Yuzhar Fadhila
Copyright
© © All Rights Reserved
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Download as PDF, TXT or read online on Scribd
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Ekonomi Moneter 2

- Literatur : Ekonomi Uang,


Perbankan, dan Pasar Keuangan
Frederic S. Mishkin edisi 9
Materi pasca UTS

- Model IS-LM
- Kebijakan Moneter dan Kebijakan
fiskal dalam model IS-LM
- Permintaan dan Penawaran Aggregat
- Uang dan Inflasi
- Ekpektasi rasional dan Implikasinya
terhadap kebijakan
Lecture 8

The ISLM Model

Reading : Ekonomi Uang, Perbankan, dan Pasar


Keuangan Frederic S. Mishkin , Ch 20
Determination of Aggregate Output

The total quantity demanded of an economy's


output is the sum of four types of spending
Y ad = C + I + G + NX
Equilibrium occurs in the economy
when the total quantity of output supplied
equals the total quantity of output demanded
Y = Y ad
Analysis assumes the price level is fixed
Consumption Expenditure and the
Consumption Function

Income is the most important factor determining consumption spending


Disposable income (YD ) is total income less taxes (Y - T)
The marginal propensity to consume (mpc) is the slope of
the consumption function (DC / DYD ), the change in consumer
expenditure that results from an additional dollar of disposable income
a is automonous consumer expenditure, the amount of consumer
expenditure that is independent of disposable income (how much
will be spent when disposable income is 0)
C = a + mpc(YD )
Investment Spending

• Fixed investment—always planned


• Inventory investment—can be unplanned
• Planned investment spending
® Interest rates
® Expectations
Expenditure Multiplier
A change in planned investment spending leads to an even larger
change in aggregate output
An increase in planned investment spending leads to an
additional increase in consumer expenditure which raises aggregate
demand and output further
1
DY = ( )DI
1- mpc
1
DY / DI = ( )
1- mpc
Changes in Autonomous Spending

Any change in autonomous spending will lead to a multiplied


change in aggregate output
1
DY = (a + I )( )
1- mpc
The shift in the aggregate demand function can come from a
change in planned investment, a change in autonomous
consumer spending, or both
Changes in autonomous spending are dominated by
animal spirits
Government’s Role
Government spending and taxes
can be used to change the position of the
aggregate demand function
Government spending adds directly
to aggregate demand
Taxes do not affect aggregate demand directly
C = a + [mpc ´ (Y - T )] = a + (mpc ´ Y ) - (mpc ´ T )
If taxes change, consumer expenditure changes
in the opposite direction
DC = -mpc ´ DT
Role of International Trade

A change in net exports (exports - imports) is positively


related to changes in aggregate output
1
DY = DNX ( )
1- mpc
The ISLM Model

• Includes money and interest rates in the


Keynesian framework
• Examines an equilibrium where aggregate output
equals aggregate demand
• Assumes fixed price level where nominal and real
quantities are the same
• IS curve is the relationship between equilibrium
aggregate output and the interest rate
• LM curve is the combinations of interest rates and
aggregate output for which MD = MS
Equilibrium in the Goods Market:
The IS Curve
• Interest rates and planned investment spending
® Negative relationship

• Interest rates and net exports


® Negative relationship

• The points at which the total quantity of goods


produced equals the total quantity of goods demanded
• Output tends to move toward points on the curve that
satisfies the goods market equilibrium
Equilibrium in the Market for Money:
The LM Curve

• Demand for money called liquidity


preference
• Md/P depends on income (Y) and
interest rates (i)
• Positively related to income
® Raises the level of transactions
® Increases wealth
• Negatively related to interest rates
Equilibrium in the Market for Money:
The LM Curve (cont’d)

• Connects points that satisfy the


equilibrium condition that MD = MS
• For each level of aggregate output, the
LM curve tells us what the interest rate
must be for equilibrium to occur
• The economy tends to move toward
points on the LM curve

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