Brief Outline of Topics Covered in Lecture 9
Chapter 20 The IS CurveThe IS curve
- Investment and the interest rate
- Net exports and the interest rate
- Equilibrium in the godds market
- The IS curve graphically, mathematically, and intuitively
- Shifts in the IS curve
- Slope of the IS curve
Chapter 21 The Monetary Policy and Aggregate Demand Curves
The MP Curve
- Shifts in the MP curve
- Slope of the MP Curve
Video
Extra Reading:
From the Dallas Fed:
Behind the Numbers: PCE Inflation Update, September 2012: This update, prepared by Dallas Fed Senior Economist Jim Dolmas, provides an in-depth analysis of the latest personal consumption expenditures (PCE) inflation data. Updates will be posted monthly, following the release of the official PCE data by the Bureau of Economic Analysis. NOTE: Terms in bold are defined in the Inflation Update Glossary.
The Dallas Fed’s trimmed mean PCE inflation rate for September was an annualized 1.9 percent, up from a revised 1.7 percent in August. With the revision to August (originally reported as an annualized 2.0 percent rate), and the latest reading, the trimmed mean has now recorded six straight months of rates below annualized 2.0 percent, though just barely in September.
The six-month trimmed mean rate ticked down to an annualized 1.6 percent from 1.7 percent in August. The 12-month trimmed mean rate held steady at 1.8 percent for a third month in a row. As we’ve noted before, the current 12-month trimmed mean rate is a good forecast of average headline PCE inflation over the next 12 months—so we expect the headline rate to average 1.8 percent between now and September 2013.
For now, though, the headline PCE inflation rate continues to be buffeted by movements in energy prices, especially the price of gasoline. For a second month in a row, the headline price index increased at a roughly 5 percent annualized rate (5.0 percent in August and 4.7 percent in September), with increases in the price of gasoline being the main contributor.
Of course, these gasoline-fueled gains in the headline index follow several months of the opposite pattern—low headline rates, pulled down by declines in the price of gasoline. Consequently, average headline rates over several months remain moderate—the six-month headline rate was an annualized 1.5 percent in September while the 12-month headline rate came in at 1.7 percent. Both of these rates are up a bit from their August levels (annualized 1.2 percent for the six-month rate and 1.5 percent for the 12-month rate).
Note that at 1.7 percent, the current 12-month headline rate is not far from the 1.8 percent rate we would forecast (based on the trimmed mean) for the coming 12 months, so—in effect—we’re expecting very little change in headline PCE inflation. ...
