Essay - Write the Equations for A Macroeconomic Model Including Private, Public...

Write the equations for a macroeconomic model including private, public, and international sectors. Derive the aggregate demand function. List the forces (i.e., factors) which are held constant for each behavioral equation. Select four of *****se and, for each, explain how a change in the exogenous factor will affect the ***** demand *****. Explain the effect of each ***** on real income and output, employment, the price level, the interest rate, ***** foreign exchange rate, and the government budget balance.

***** this question asks us to derive ***** aggregate demand function, it should be noted that ***** demand models do not exist sui generis but rather as a part ***** the paired set of aggregate supply and aggregate dem*****. These paired ideas toge*****r form a model of an aggregate economy, ***** is simply one in which the ***** level of any good is set by a balance that exists (or is sought) between the ability of an *****dividual, nation or set of nations to produce goods and services and their ***** to raise and spend money to acquire the same products.

Aggregate supply is simply ***** ability of individuals, *****, or supra-national groups ***** ***** goods and services. This ability is *****d from the degree and availability of technology, the type and availability of raw materials (***** subcomponents) and the availability of the necessary labor. As one might surm*****e, the ***** demand is the mirror image of th*****. Th***** the aggregate demand is the "ability to spend," which is itself a combination of income and interest rates. Aggregate demand can be seen as an expression of the inverse relationship that always ***** between the price ***** and purch*****ing power: As prices r*****e (because interest ***** rise or real income rises and produces inflation ***** output falls ***** produced scarcity), purchasing ***** falls.

********** equation is actually a little more complic*****ted than this, because it must also take into effect (on the international level) the exchange rate between nations (which becomes a ***** of cost *****nd so ********** demand) as well as governmental budgetary *****s because government intervention, which can serve to increase or decrease ***** levels, increase ***** decrease interest levels, make ***** ***** ***** or less available, and affect ***** rates.

***** course, economies are rarely even close ***** equilibrious states, and the ***** *****-aggregate dem***** model ***** also be used to model shifts in *****and and supply as can be seen in the following graphs. In fact, this model may be more useful for helping us to understand economic "shocks." supply-side shock, such as an ***** in labor productivity, would shift AS outward -- there is a greater potential ***** produce at each and every price level. We can see this change ***** figure 1 to the left. ***** shock, in time, creates an excess supply of goods (Y* > YR) and puts downward pressure on the price level. As ***** fall, purchasing power increase reflecting an increase in the ***** to spend (i.e., a movement ***** A to