Important Graphs

Important Graphs
-Graph #1
       Production Possibility Graph (opportunity Costs)

-Graph #2

      Business Cycles

For Explanation of the Graph and it's Elements Click Here!

-Graph #3

      Aggregate Model (Traditional)

-Graph #4

      Aggregate Model (Common)

-Graph #5

      Aggregate Model (Modern)

No curve; easier to draw

-Graph #6

      Consumption Function

When dissaving occurs people spend more than their DI
Disposable Income: whatever is left after bills (spend or save)
45 degree angle presented is the multiplier effect (interpreted that people are living paycheck to paycheck)
NO SAVING IS OCCURRING

-Graph #7

      Savings Function

Dissavings (unexpected inventory LOSS)
Savings (unexpected inventory GAIN)
Horizontal Axis is Disposable Income (DI)

-Graph #8

      Consumption and Savings Link

DI: C + Savings
If C increases, then Savings decrease
MPC + MPS = 1
C2: Consumption increased at every level of DI
Poor and Rich are spending MORE
Ex. Sudden increase in DI - Christmas

-Graph #9

      Investment Demand

I :Interest: cost of Doing
Reasons to borrow money:
1. Business
2.Mortgages
3.Education 

-Graph #10

      Money Market

*Supply of Money is controlled by the Fed. (bonds)
*Demand of money includes private sector and fiscal policy by Congress.
*Tight Money: interest rates high
*Easy Money: interest rates low

-Graph # 11

      Loanable Funds or Bond Market

*S = Willingness of society to save
*D = Willingness to demand loans; businesses and households
*Bond: Principal and Interest ("private" rated bonds and Government Bonds issued by Fed
*when r is up Price of bonds down

-Graph #12

      Crowding Out

G up (spending)
C up (tax cuts)
Ig down (i up)

-Graph #13
      Phillips Curve

Supply Shocks:
-Shift = change in AS
-Move along the curve

-Graph #14

       Laffer Curve

As tax rates increase from zero, tax revenues increase from zero to some max value, then they decline.

-Graph #15

        Dollar Market (International S and D)

As two currencies trade:
1. One supply line will change the other demand line will change
2. They will move in the same direction
3. One currency will appreciate the other will depreciate
$Appreciate = more Euros needed to purchase a dollar
$Depreciate = fewer Euros needed to purchase a dollar
U.S. exports will be affected

-Graph #16

       Other Market (International S and D)

Dollar appreciates (Up)
-Demand increases (up)
-Supply decreases (down)

Dollar depreciates (Down)
-Demand decreases (down)
-Supply increases (up)