Haberler, the League of Nations, and the Quest for
... inability to realize this. Furthermore, Kahn found “remarkable that you pay so little attention to
Mr Keynes’ theory of what determines the amount of output and employment... Nowhere in your
analysis is there any suggestion that the sole direct cause of fluctuations in employment may be
1 Principles of Macroeconomics, 9e
... 57) Refer to Figure 8.3. Which of the following statements is FALSE?
A) Aggregate saving is negative for all income levels below $400 billion.
B) For all aggregate income levels above $200 billion, aggregate consumption is less than
C) If consumption is the only expenditure, this e ...
... agriculture, in minerals, or in labour – development economists thus promoted a dynamic
diversification of an economy. This still appropriate, albeit already then somewhat
‘heterodox’ approach implied an active role of the state in changing the economic structure by
generating and re-allocating rent ...
The Sraffian Supermultiplier - Instituto de Economia
... lot more than the European has. And that is not a coincidence! If
the Europeans had a lot more people looking for jobs , there would
be more jobs". ( Arrow , 1989, p. 175-176). Notice that Arrow is
talking about two distinct
'stylized facts' (and their common
neoclassical explanation). The first rel ...
Chapter 7 - Dr. George Fahmy
... constant at P0 A positive GDP gap––one where real GDP is below potential GDP––is
now identified as a recessionary gap. The distance Y1 – y* in Fig. 7-1 is a recessionary
gap when y* is specified as the full-employment level of output and aggregate demand is AD1. An inflationary gap exists when there ...
Aggregate Demand and Supply Aggregate Demand and
... of economics was Adam Smith. Exhibit 5 uses the aggregate demand and supply model to illustrate the classical view that the aggregate supply curve, AS,
is a vertical line at the full-employment output of $10 trillion. The vertical
shape of the classical aggregate supply curve is based on two assumpt ...
In‡ation Targeting: Is the NKM …t for purpose? Peter N. Smith and
... …xed proportion to output then substitutability between factors is not possible. In this case, its
marginal product is …xed and so its marginal cost, and hence the price of the good, will increase.
Output will then fall which will reduce the demand for all factors. In practice, in the short run,
NBER WORKING PAPER SERIES LIQUIDITY TRAPS AND EXPECTATION DYNAMICS:
... The practical importance of the zero lower bound (ZLB) has become evident
in the US and Europe since the 2007-9 …nancial crisis, as well as in the US
during 2001-3 and in Japan since the mid 1990s.1 Recently Bullard (2010)
has stressed the risk of extended periods of de‡ation. These events have
keynesian and new(keynesian models: the impact of military
... From a theoretical point of view, we assume a standard Dynamic Stochastic General Equilibrium Model (DSGE) with an economy with sticky prices and limited asset
market participation. Moreover, we assume the existence of a …scal policy authority
that purchases consumption goods (divided in spending fo ...
Week 17 - Lancaster University
... e. The government budget deficit
Flow. The deficit is the government’s spending less its receipts. Spending and
receipts are measured per unit of time, such as a year or quarter.
f. The quantity of outstanding government debt on 1 January 2003
Stock. The quantity of government debt outstanding is me ...
The Government and Fiscal Policy
... consumption function is C = 400 + 0.5Yd and
taxes are $200 billion, at equilibrium the value of
autonomous consumption is
• A) $400 billion.
• B) $300 billion.
• C) $100 billion.
• D) $200 billion
1 Principles of Macroeconomics, 9e
... 3) The problem with the traditional macroeconomic treatment of expectations of inflation is
A) the model is not consistent with the microeconomic assumption that individuals are
rational, forward-looking people.
B) the model assumes that individuals will merely guess at what the inflation rate ...
The Modern Macroeconomic Debate
... Markets unleash individual initiative,
increase supply, and bring about
But markets create recessions too.
... relatively brief upward trend over the mid-1990s, the saving rate started to decline during the penultimate
years of the investment boom, which continued during the subsequent investment slump. The weakening
of national saving has been associated with a parallel shift of the external current account ...
Chapter 25 Aggregate Demand and Supply Analysis
... (a) a lower price level, holding the nominal quantity of money constant, leads to a larger quantity of
money in real terms, causes the interest rate to fall, and stimulates planned investment spending.
(b) a lower price level, holding the nominal quantity of money constant, leads to a larger quantit ...
Mankiw 5/e Chapter 10: Aggregate Demand I
... What is the Fed’s policy instrument?
Why does the Fed target interest rates
instead of the money supply?
1) They are easier to measure than the
2) The Fed might believe that LM shocks are
more prevalent than IS shocks. If so, then
targeting the interest rate stabilizes income
better th ...
The Government Transfer Multiplier
... Despite the focus on the government purchase multiplier in the literature (Woodford 2010,
Christiano et al 2011, Cogan et al 2010), the majority of the increase in government spending during
the global financial crisis was government transfers to households, not government purchases.
According to Oh ...
... CHAPTER SUMMARY
In the short run, output deviates from its natural
rate when the price level is different than
expected, leading to an upward-sloping short-run
aggregate supply curve. The three theories
proposed to explain this upward slope are the
sticky wage theory, the sticky price theory, and ...
- Rainer Maurer
... Change demand should lead
1929to an increase in
Chapter 24: Aggregate Demand, Aggregate Supply, and Inflation
... The Aggregate Supply Curve:
• When we draw a firm’s supply curve,
we assume that input prices are
constant. In macroeconomics, an
increase in the overall price level
means that at least some input
prices will be rising as well.
• The outputs of some firms are the
inputs of other firms.
SAVING IS THE ACCOUNTING RECORD OF INVESTMENT
... Consider the “hat check theory of money”. Suppose tokens given out in the check room of a leading opera house
came to circulate as the money supply. Individuals would then demand to hold tokens as a function of their income,
wealth, and relative interest rates. But the total quantity of tokens in ex ...
By How Much Does GDP Rise If the Government Buys More Output?
... the government purchases enter preferences in a separable fashion: they do
not affect households’ marginal rate of substitution between consumption
and work or between consumption this year and in any future year. Military
spending is the obvious example. If instead the government provided consumers ...
... down in the real world. In fact, it can not be excluded that potential output had been overestimated
in the boom-period before the financial crisis.
An other important feature of the Secular Stagnation debate is the possibility of excess savings
that would require real interest rates to be very low ...
Keynesian economics (/ˈkeɪnziən/ KAYN-zee-ən; or Keynesianism) is the view that in the short run, especially during recessions, economic output is strongly influenced by aggregate demand (total spending in the economy). In the Keynesian view, aggregate demand does not necessarily equal the productive capacity of the economy; instead, it is influenced by a host of factors and sometimes behaves erratically, affecting production, employment, and inflation.The theories forming the basis of Keynesian economics were first presented by the British economist John Maynard Keynes in his book, The General Theory of Employment, Interest and Money, published in 1936, during the Great Depression. Keynes contrasted his approach to the aggregate supply-focused 'classical' economics that preceded his book. The interpretations of Keynes that followed are contentious and several schools of economic thought claim his legacy.Keynesian economists often argue that private sector decisions sometimes lead to inefficient macroeconomic outcomes which require active policy responses by the public sector, in particular, monetary policy actions by the central bank and fiscal policy actions by the government, in order to stabilize output over the business cycle. Keynesian economics advocates a mixed economy – predominantly private sector, but with a role for government intervention during recessions.Keynesian economics served as the standard economic model in the developed nations during the later part of the Great Depression, World War II, and the post-war economic expansion (1945–1973), though it lost some influence following the oil shock and resulting stagflation of the 1970s. The advent of the financial crisis of 2007–08 has caused a resurgence in Keynesian thought.