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In macroeconomics I come across lot of sentences like

In the short run, demand determines output.
In the short run, the central bank determines the interest rate.
In the short run, output is determined by equilibrium in the goods and financial markets.

Should the word determines be read as causation, correlation or constraints?

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2 Answers 2

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Determines is not a technical jargon but just a regular English word. As many other English words it has different meaning depending on context, English is high context language. Moreover, it has actually different meaning even in those two examples.

  • In the demand example, word determines means influences/causes i.e. output firms produce is caused or influenced by the aggregate demand.

  • In the central bank example determines, means controls/sets, i.e. it is the choice variable of central bank.

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You could also write "influences" instead of determines.

  1. In the short run, demand influences output.
  2. In the short run, the central bank influences the interest rate.
  3. In the short run, output is influenced by equilibrium in the goods and financial markets.

The strength of the influence will vary by context.

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