Keynesian vs. monetarist/new classical view
... Vertical portion: The vertical range of AS at YFE and beyond is the same as the physical limit illustrated earlier (Figure 3.3.2 SRAS) where firms simply cannot increase output whatever the incentives of final prices. The complete price inelasticity of supply beyond point YFE illustrates the effect ...
... Vertical portion: The vertical range of AS at YFE and beyond is the same as the physical limit illustrated earlier (Figure 3.3.2 SRAS) where firms simply cannot increase output whatever the incentives of final prices. The complete price inelasticity of supply beyond point YFE illustrates the effect ...
FOE September 2015 Exam Paper – Final
... iii) Explain what is meant by the term ‘involuntary unemployment’ in the context of the above model/diagram. ...
... iii) Explain what is meant by the term ‘involuntary unemployment’ in the context of the above model/diagram. ...
Chapter 8 Aggregate Demand and Aggregate Supply
... – When domestic prices are high, we will export less to foreign buyers and we will import more from foreign producers. Therefore higher prices leads to less domestic output. ...
... – When domestic prices are high, we will export less to foreign buyers and we will import more from foreign producers. Therefore higher prices leads to less domestic output. ...
Modern Perspectives on Keynesian Stabilization Policies
... policies during recessions. The fact that the economy fluctuates about a distorted steady state implies that the welfare losses resulting from the greater inefficiency associated with recessions are of first order, and could be quite substantial quantitatively. Thus, for instance, GGL estimates sugg ...
... policies during recessions. The fact that the economy fluctuates about a distorted steady state implies that the welfare losses resulting from the greater inefficiency associated with recessions are of first order, and could be quite substantial quantitatively. Thus, for instance, GGL estimates sugg ...
Problem Set 7 – Some Answers FE312 Fall 2010 Rahman 1
... Equilibrium saving remains unchanged. The national accounts identity tells us that saving equals investment, or S = I. In the Keynesian-cross model, we assumed that desired investment is fixed. This assumption implies that investment is the same in the new equilibrium as it was in the old. We can co ...
... Equilibrium saving remains unchanged. The national accounts identity tells us that saving equals investment, or S = I. In the Keynesian-cross model, we assumed that desired investment is fixed. This assumption implies that investment is the same in the new equilibrium as it was in the old. We can co ...
AD - Andre R. Neveu
... Keynesian economics was developed during the Great Depression (1930s). Keynesian theory provided an explanation for the severe and prolonged unemployment of the 1930s. Keynes argued that wages and prices were highly inflexible, particularly in a downward direction. Thus, he did not think changes in ...
... Keynesian economics was developed during the Great Depression (1930s). Keynesian theory provided an explanation for the severe and prolonged unemployment of the 1930s. Keynes argued that wages and prices were highly inflexible, particularly in a downward direction. Thus, he did not think changes in ...
Topic 2.2 Aggregate demand student version
... real value of incomes ____ and consumers are ____ able to buy what they want or need. Balance of trade – a persistent rise in the price level of the UK makes foreign produced goods ______, causing a ___ in exports & ___ in imports Interest rate effect – if the price level rises, this causes infl ...
... real value of incomes ____ and consumers are ____ able to buy what they want or need. Balance of trade – a persistent rise in the price level of the UK makes foreign produced goods ______, causing a ___ in exports & ___ in imports Interest rate effect – if the price level rises, this causes infl ...
No Slide Title
... causing interest rates to rise and investment and net exports to rise by smaller amounts. As Y rises, competition for resources causes other prices to rise. Equilibrium Y occurs at Y2 and P2. National income rises from Y1 to Y2*. Prices rise from P1 to P2. ...
... causing interest rates to rise and investment and net exports to rise by smaller amounts. As Y rises, competition for resources causes other prices to rise. Equilibrium Y occurs at Y2 and P2. National income rises from Y1 to Y2*. Prices rise from P1 to P2. ...
Economic Models The selection of variables
... • Which stabilization policy is likely to have the most positive influence on economic growth? • Does the fiscal multiplier depend upon monetary response in the Japanese economy? • What is meant by the crowding out effect? • What conditions in the money market add to the potential crowding out effec ...
... • Which stabilization policy is likely to have the most positive influence on economic growth? • Does the fiscal multiplier depend upon monetary response in the Japanese economy? • What is meant by the crowding out effect? • What conditions in the money market add to the potential crowding out effec ...
Use the following to answer question 1
... will be the levels of private saving, public saving, and national saving? (Hint: Check C + I + G = Y.) b. Now assume that the government wants to cut taxes to 1,000. With G set at 1,200, what will the interest rate be at Y = 4,000? What must be the value of M? What will I be? What will be the levels ...
... will be the levels of private saving, public saving, and national saving? (Hint: Check C + I + G = Y.) b. Now assume that the government wants to cut taxes to 1,000. With G set at 1,200, what will the interest rate be at Y = 4,000? What must be the value of M? What will I be? What will be the levels ...
Microfoundations - EUR RePub - Erasmus Universiteit Rotterdam
... observed phenomenon of unemployment. From a market-clearing perspective, unemployment simply means that at the current (real) wage rate people do not want to supply more labor to the market. If there is registered unemployment it is thus either of a ‘voluntary’ nature, or a short-run phenomenon that ...
... observed phenomenon of unemployment. From a market-clearing perspective, unemployment simply means that at the current (real) wage rate people do not want to supply more labor to the market. If there is registered unemployment it is thus either of a ‘voluntary’ nature, or a short-run phenomenon that ...
View PDF - CiteSeerX
... activism during the Great Recession has been somewhat of a surprise. After all, since the late 1970s, most mainstream economists had completely abandoned faith in fiscal policy effectiveness, largely because of the empirically dubious Ricardian Equivalence Hypothesis (see Barro 1974). Nevertheless, ...
... activism during the Great Recession has been somewhat of a surprise. After all, since the late 1970s, most mainstream economists had completely abandoned faith in fiscal policy effectiveness, largely because of the empirically dubious Ricardian Equivalence Hypothesis (see Barro 1974). Nevertheless, ...
SHORT DEFINATIONS OF TERMINOLOGIES
... Investment, and monetary Liquidity Preference Theory of interest accompanied by speculative motive for demand for money are some of his important contributions. ...
... Investment, and monetary Liquidity Preference Theory of interest accompanied by speculative motive for demand for money are some of his important contributions. ...
Macroeconomics Unit 2
... Classical Theory (Cont.) 3. Keynes also argued that even if wages and prices were flexible a free enterprise economy would not always be able to achieve automatic full employment. ...
... Classical Theory (Cont.) 3. Keynes also argued that even if wages and prices were flexible a free enterprise economy would not always be able to achieve automatic full employment. ...
1. a. Suppose a government decides to reduce spending and (lump
... 6. According to the model developed in Chapter 3, when government spending increases and taxes increase by an equal amount: A) consumption and investment both increase. B) consumption and investment both decrease. C) consumption increases and investment decreases. D) consumption decreases and invest ...
... 6. According to the model developed in Chapter 3, when government spending increases and taxes increase by an equal amount: A) consumption and investment both increase. B) consumption and investment both decrease. C) consumption increases and investment decreases. D) consumption decreases and invest ...
Lecture 20 Keynesian Model and Policy Analysis
... fluctuations. Fiscal policy takes longer to implement, money is more direct. Limitation on monetary policy: nominal interest rates are bounded at zero. Can’t set nominal interest rates negative: everyone would want to borrow. Means LM curve very flat near zero interest rates. So increases in money s ...
... fluctuations. Fiscal policy takes longer to implement, money is more direct. Limitation on monetary policy: nominal interest rates are bounded at zero. Can’t set nominal interest rates negative: everyone would want to borrow. Means LM curve very flat near zero interest rates. So increases in money s ...
Handout: Econ 209 The Keynesian Model This model was born out
... The first term on the right hand side, {1/ (1-[mpc(1-t)-mpi])}, is the mathematical expression for our model’s Keynesian multiplier. Since the multiplier involves induced consumption, any leakage will diminish it. To verify, increase the size of any leakage and see what happens to the size of the mu ...
... The first term on the right hand side, {1/ (1-[mpc(1-t)-mpi])}, is the mathematical expression for our model’s Keynesian multiplier. Since the multiplier involves induced consumption, any leakage will diminish it. To verify, increase the size of any leakage and see what happens to the size of the mu ...
From Keynes to Hayek: The Marvel of Thriving
... The implications for the Austrian theory are clear. Hayek’s critical contrast between the intertemporal coordination that can be achieved by the free play of the market and the intertemporal discoordination that results from the manipulation of a key market mechanism, namely, the interest rate, is s ...
... The implications for the Austrian theory are clear. Hayek’s critical contrast between the intertemporal coordination that can be achieved by the free play of the market and the intertemporal discoordination that results from the manipulation of a key market mechanism, namely, the interest rate, is s ...
slides
... short-term rate of interest cannot fall any lower than zero, whereas a negative nominal short-term rate would be needed to achieve full employment. This is no different from Patinkin ...
... short-term rate of interest cannot fall any lower than zero, whereas a negative nominal short-term rate would be needed to achieve full employment. This is no different from Patinkin ...
how complicated does the model have to be?
... about. And in some areas—notably international trade—they had thought through how things fitted together in an economy producing two goods. But what about economies with three or more goods, where some pairs of goods might be substitutes, others complements, and so on? This is not the place to go at ...
... about. And in some areas—notably international trade—they had thought through how things fitted together in an economy producing two goods. But what about economies with three or more goods, where some pairs of goods might be substitutes, others complements, and so on? This is not the place to go at ...
Additional Reading 11
... value because the purchasing power of money falls. As buyers become poorer, they reduce their purchases of all goods and services which in turn reduce the aggregate expenditure (AE curve makes a parallel shift down) and contract the economy (Y decreases). On the other hand, as the price level falls, ...
... value because the purchasing power of money falls. As buyers become poorer, they reduce their purchases of all goods and services which in turn reduce the aggregate expenditure (AE curve makes a parallel shift down) and contract the economy (Y decreases). On the other hand, as the price level falls, ...
Quiz: Introductory Macroeconomics
... interest rate, will output go actually go up by more or less than the amount that you calculated in part E), which assumed that investment did not change? Explain in two short sentences. (10 points) Output will go up by less than 500, because money demand will shift out, which will cause the interes ...
... interest rate, will output go actually go up by more or less than the amount that you calculated in part E), which assumed that investment did not change? Explain in two short sentences. (10 points) Output will go up by less than 500, because money demand will shift out, which will cause the interes ...
Answer Key - uob.edu.bh
... a. An increase in government spending and an increase in taxes. b. An increase in government spending and a decrease in taxes. * c. A decrease in government spending and an increase in taxes. d. A decrease in government spending and an decrease in taxes. 7. Evidence suggesting that prices and wages ...
... a. An increase in government spending and an increase in taxes. b. An increase in government spending and a decrease in taxes. * c. A decrease in government spending and an increase in taxes. d. A decrease in government spending and an decrease in taxes. 7. Evidence suggesting that prices and wages ...
Mecpoc Symposium design
... challenge to the world economy in our generation.” Yet, there is little consensus on what policies should be blamed: bank supervision failures? The Fed raising interest rates too early? The Fed keeping rates too low? The U.S. Treasury running an excessive (or too low, rather?) budget deficit? Intern ...
... challenge to the world economy in our generation.” Yet, there is little consensus on what policies should be blamed: bank supervision failures? The Fed raising interest rates too early? The Fed keeping rates too low? The U.S. Treasury running an excessive (or too low, rather?) budget deficit? Intern ...
PROBLEM SET 2 14.02 Macroeconomics March 6, 2006
... Examine the movements of consumption, investment and the response of monetary policy before, during and after the recession of 2001. a. Download the 2005 Economic Report of the President from the 14.02 course website. Now track consumption and investment around 2000 and 2001. Table B-4 in the statis ...
... Examine the movements of consumption, investment and the response of monetary policy before, during and after the recession of 2001. a. Download the 2005 Economic Report of the President from the 14.02 course website. Now track consumption and investment around 2000 and 2001. Table B-4 in the statis ...