In Macroeconomics, You Studied the Equilibrium in the Goods and Money

question 16

Essay

In macroeconomics, you studied the equilibrium in the goods and money market under
the assumption of prices being fixed in the very short run.The goods market equilibrium
was described by the so-called IS equation $$R _ { i } = \beta _ { 0 } - \beta _ { 1 } Y _ { i } + u _ { i }$$
where $R$ represented the nominal interest rate and $Y$ was real GDP. $\beta _ { 0 }$ contained variables determined outside the system, such as government expenditures, taxes, and inflationary expectations.
The money market equilibrium was given by the so-called LM equation
$$R _ { i } = \gamma _ { 0 } + \gamma _ { 1 } Y _ { i } + v _ { i }$$
and $\gamma _ { 0 }$ contained the real money supply and the intercept from the money demand equation. Show that there is simultaneous causality bias in this situation.

---

Definitions:

Precava

A term not recognized as a standard anatomical or medical key term, indicating it may be incorrect or misspelled. NO.

External Jugular Vein

A vein located on each side of the neck that drains blood from the head, neck, and upper chest area into the superior vena cava.

Subclavian Vein

A large vein located under the collarbone (clavicle) that drains blood from the upper extremities back to the heart.

Pulmonary Vein

The blood vessels that carry oxygenated blood from the lungs back to the left atrium of the heart.