260
MACROECONOMICS
SUMMARY
Walras’ Law states that the sum of the excess demand for
money, bonds, and current output must equal zero.
Walras’ Law allows macroeconomics to explicitly analyse the
markets for goods, output, and money markets and ignore
the bond market.
The nominal interest rate is the sum of the real interest rate
and the expected rate of inflation.
Consumption is a positive function of aggregate income and
is negatively related to the real interest rate.
Investment is positively related to the productivity of capital
and negatively to the real interest rate.
Equilibrium in the product market is given by the condition ...
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