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If any of the components of aggregate demand, a, I p or G rises, for a given level of income, Y, the aggregate demand curve shifts up and the intersection of the AD curve with the 45-degree line shifts right. Similarly, if any of these three components falls, the AD curve shifts down and the intersection of the AD curve with the 45-degree line ...
An example of real GDP (y) plotted against time (x).Often time is denoted as t instead of x. The IS curve moves to the right if spending plans at any potential interest rate go up, causing the new equilibrium to have higher interest rates (i) and expansion in the "real" economy (real GDP, or Y).
The straight lines which form right angles are called perpendicular. [8] Euclid uses right angles in definitions 11 and 12 to define acute angles (those smaller than a right angle) and obtuse angles (those greater than a right angle). [9] Two angles are called complementary if their sum is a right angle. [10]
In this example of a traditional IS–LM chart, the IS curve moves to the right, causing higher interest rates (i) and expansion in the "real" economy (real GDP, or Y). The IS–LM model, invented by John Hicks in 1936, gives the underpinnings of aggregate demand (itself discussed below). It answers the question "At any given price level, what ...
A macroeconomic model is an analytical tool designed to describe the operation of the problems of economy of a country or a region. These models are usually designed to examine the comparative statics and dynamics of aggregate quantities such as the total amount of goods and services produced, total income earned, the level of employment of productive resources, and the level of prices.
The Lucas islands model is an economic model of the link between money supply and price and output changes in a simplified economy using rational expectations.It delivered a new classical explanation of the Phillips curve relationship between unemployment and inflation.
Alternatively, Engel curves can also describe how real expenditure varies with household income. They are named after the German statistician Ernst Engel (1821–1896), who was the first to investigate this relationship between goods expenditure and income systematically in 1857.
Real business-cycle theory (RBC theory) is a class of new classical macroeconomics models in which business-cycle fluctuations are accounted for by real, in contrast to nominal, shocks. [1] RBC theory sees business cycle fluctuations as the efficient response to exogenous changes in the real economic environment.