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The IS curve moves to the right if spending plans at any potential interest rate go up, causing the new equilibrium to have higher interest rates (i) and expansion in the "real" economy (real GDP, or Y). In most mathematical contexts, the independent variable is placed on the horizontal axis and the dependent variable on the vertical axis.
A curve may have equivalent parametrizations when there is a continuous increasing monotonic function relating the parameter of one curve to the parameter of the other. When there is a decreasing continuous function relating the parameters, then the parametric representations are opposite and the orientation of the curve is reversed. [1] [2]
In the case of two goods and two individuals, the contract curve can be found as follows. Here refers to the final amount of good 2 allocated to person 1, etc., and refer to the final levels of utility experienced by person 1 and person 2 respectively, refers to the level of utility that person 2 would receive from the initial allocation without trading at all, and and refer to the fixed total ...
The Keynesian cross diagram is a formulation of the central ideas in Keynes' General Theory of Employment, Interest and Money.It first appeared as a central component of macroeconomic theory as it was taught by Paul Samuelson in his textbook, Economics: An Introductory Analysis.
Convexity is a measure of the curvature or 2nd derivative of how the price of a bond varies with interest rate, i.e. how the duration of a bond changes as the interest rate changes. [3] Specifically, one assumes that the interest rate is constant across the life of the bond and that changes in interest rates occur evenly.
IS curve represented by equilibrium in the capital market and Keynesian cross diagram. The IS curve shows the causation from interest rates to planned investment to national income and output. For the investment–saving curve, the independent variable is the interest rate and the dependent variable is the level of income.
Inverted yield curves happen when bonds with shorter maturity periods have higher yields than bonds with longer maturity periods. Under normal circumstances, it's the other way around. Since...
An inverted curve has indicated a worsening economic situation in the future eight times since 1970. [10] In addition to potentially signaling an economic decline, inverted yield curves also imply that the market believes inflation will remain low. This is because, even if there is a recession, a low bond yield will still be offset by low ...