Intermediate Macroeconomics: Equilibrium
نویسنده
چکیده
In our discussion of consumption, we analyzed the problem of an optimizing household that takes the real interest rate as given. In this set of notes we endogenize the real interest rate. In particular, the real interest rate serves as a price that clears markets, and will play a central role in a more sophisticated model of the economy. We endogenize the real interest rate here in a particularly simple environment in which “supply” (income, or real GDP, Y ) is exogenously fixed. This is a gross simplification but the analysis turns out to have important insights into a more sophisticated model in which supply is endogenous.
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