Page 53 - DECO201_MACRO_ECONOMICS_ENGLISH

Macro Economics

Notes Figure 3.15
Y
Real
R/I S

r E
1 2

r E
2 1 I
2
I
1
X
O I I S, I
1 2

Figure 3.16
Y
Real
R/I
S

r
1 E
1
r E
2 2 I
I

X
O I I S, I
2 1

Given S = I (Capital market eq.)....................(i)
f
AD = C + I ...................................................(ii)
AS = Y = C + S
f f
or S = Y - C ...................................................(iii)
f f
Substitute (iii) in (i),

Y – C = I ...................................................(iv)
f
Substitute (iv) in (ii),
C + (Y – C) = C + I
f
Y = C + I
f
AS = AD ( Y = AS)
f

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