322
MACROECONOMICS
NOTES
1.
The presumption here is that the Marshall–Lerner
condition holds.
2.
A
r
0 as a rise in the interest rate reduces consumption
and investment. 0
A
Y
1 as a rise in income induces
a rise in consumption expenditure.
NX
Y
0 as a rise in
income increases imports and reduces net exports.
NX
E
0
as a depreciation of the currency increases export competi-
tiveness and increases net exports.
3.
r/
Y
|
IS
=
[
(
S
-
NX
)
/
Y
]/[
A /
r
]
=
[
(
S
-
NX
)
/
Y
]
/
[
(
C
+
I)/
r
] for an open economy.
4.
r
/
Y
|
open economy
=
[(1
-
A
Y
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