intermediate macroeconomics notes ○ ● What happens when things change? What would happen in a closed economy, a small open economy, and a large open economy?

Name: Intermediate Macroeconomics Notes Week #7
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ECON 3020 Notes for Week #7 22 February 2016 The Closed Economy ● in a closed economy goodsmarket equilibrium occurs when S = I ● S = Y − C − G = I ● S = Y − (C + C(Y − T, r)) − G = I + I(r) = I S = Y − C − C(Y − T, r) − G = I + I(r) = I ● ● as r increases, C(Y − T, r) increases, so the S curve has a positive slope ● as r increases, I(r) decreases, so the I curve has a negative slope ● at r : 2 ○ there are excess savings ○ savers will accept a lower r in order to incentivize borrowers to borrow more ○ this will cause some savers to save less ● at r :