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31.1 the short-run phillips curve
31.1 the short-run phillips curve

... percentage as the increase in the equilibrium price level, to keep the real wage rate at it full-employment level. As the price level rises, real GDP remains at potential GDP. Figure 31.4 on the next slide illustrates this long-run adjustment using the AS-AD model. ...
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... its natural rate, the corresponding ’natural’ level of output may fluctuate due to short-run fluctuations in labour productivity. Second, output will tend to fluctuate around its trend to the extent that unemployment fluctuates around its natural rate. In the previous chapter we found that the rate ...
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Liquidity Traps and Monetary Policy: Managing a Credit Crunch

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... rates that banks charged in 1980 as scandalously high while they saw the 7% mortgage rates of 1998 as a great bargain. – In truth, however, the real interest rate in 1998 (about 5%) was well above the bargain-basement real rates in 1980 (about 2%). ...
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... equation (9) implies P3= .126 per year, which corresponds to a halflife for the log of output per effective worker of 5.5 years. For ax = .80, which might apply if capital is interpreted broadly to include human capital, the value P3= .026 per year implies a half-life of 27 years. As at approaches u ...
Convergence The Harvard community has made this article openly
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... equation (9) implies P3= .126 per year, which corresponds to a halflife for the log of output per effective worker of 5.5 years. For ax = .80, which might apply if capital is interpreted broadly to include human capital, the value P3= .026 per year implies a half-life of 27 years. As at approaches u ...
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LAND PRICES AND UNEMPLOYMENT
LAND PRICES AND UNEMPLOYMENT

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Growth Effects of 1992 - Graduate Institute of International and

... industrial structure that actually exists. Obviously in this unadulterated form, the assumption does not pass the laugh-test, much less any sort of econometric test. Nevertheless, rejecting firm-level constant returns does not let us reject the traditional model. What the model actually requires is ...
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DP2007/10 Understanding the New Zealand Current Account: A Structural Approach

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Keynesian Macroeconomics without the LM Curve

Chapter 1: Introduction
Chapter 1: Introduction

< 1 ... 9 10 11 12 13 14 15 16 17 ... 69 >

Okishio's theorem

Okishio's theorem is a theorem formulated by Japanese economist Nobuo Okishio. It has had a major impact on debates about Marx's theory of value. Intuitively, it can be understood as saying that if one capitalist raises his profits by introducing a new technique that cuts his costs, the collective or general rate of profit in society – for all capitalists – goes up.Okishio [1961] establishes this theorem under the assumption that the real wage – the price of the commodity basket which workers consume – remains constant. Thus, the theorem isolates the effect of 'pure' innovation from any consequent changes in the wage.For this reason the theorem, first proposed in 1961, excited great interest and controversy because, according to Okishio, it contradicts Marx's law of the tendency of the rate of profit to fall. Marx had claimed that the new general rate of profit, after a new technique has spread throughout the branch where it has been introduced, would be lower than before. In modern words, the capitalists would be caught in a rationality trap or prisoner's dilemma: that which is rational from the point of view of a single capitalist, turns out to be irrational for the system as a whole, for the collective of all capitalists. This result was widely understood, including by Marx himself, as establishing that capitalism contained inherent limits to its own success. Okishio's theorem was therefore received in the West as establishing that Marx's proof of this fundamental result was inconsistent.More precisely, the theorem says that the general rate of profit in the economy as a whole will be higher if a new technique of production is introduced in which, at the prices prevailing at the time that the change is introduced, the unit cost of output in one industry is less than the pre-change unit cost. The theorem, as Okishio (1961:88) points out, does not apply to non-basic branches of industry.The proof of the theorem may be most easily understood as an application of the Perron–Frobenius theorem. This latter theorem comes from a branch of linear algebra known as the theory of nonnegative matrices. A good source text for the basic theory is Seneta (1973). The statement of Okishio's theorem, and the controversies surrounding it, may however be understood intuitively without reference to, or in-depth knowledge of, the Perron–Frobenius theorem or the general theory of nonnegative matrices.
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