MIT 14 02 - Real Interest Rates / Open economy AD-AS framework (4 pages)

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Real Interest Rates / Open economy AD-AS framework



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Real Interest Rates / Open economy AD-AS framework

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Lecture Notes


Pages:
4
School:
Massachusetts Institute of Technology
Course:
14 02 - Principles of Macroeconomics
Principles of Macroeconomics Documents
Unformatted text preview:

Lecture 17 Real Interest Rates Open economy AD AS framework Nominal and real interest rates AD AS in an open economy Real and Nominal Interest Rates IS Y C Y T I Y r G LM M YL i P r The Long Run Fisher hypothesis i e e g m g y Figures 14 2 14 6 14 7 Changes are relatively small a constant AD AS in Open Economy i e i E E E infl Approx 0 disregard dynamics Y C Y T I Y i G NX Y Y E P P Y Y E P G T P P t P t 1 1 F 1 Y t z L AS given P t 1 P AD given E Yn Devaluation dynamics Adjustment to an Overvaluation Costs expectations Figures 21 1 21 2 21 3


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