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The Application of Circuit- consistent Money to Macroeconomic
The Application of Circuit- consistent Money to Macroeconomic

... real consumption and investment are decided on by capitalists, and that this is achieved by their setting a price to equalise demand and supply in the consumption goods market. The higher the price set, the lower is the proportion of consumption goods going to wage-earners, but the greater nominal ...
The comparative statics of effective demand
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... The second line of Table 1 lists the production function as well as Z and D for the second set of assumptions, and Figure 2 shows the result of the simulation. The Z curve moves down. Its slope is now the inverse of 0.75, so it is flatter than before. The D curve moves up because every unit of emplo ...
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... For an individual region, the identities embodied in the above then imply the balance of payments identity, which sets the current account surplus equal to the capital account deficit: X – M = SP + SG – I.15 From the pool of global savings, investment is allocated across regions and places demands o ...
Purchasing power parity
Purchasing power parity

... Kentucky than in New York, New York. This is even more noticeable within the Eurozone. Imported goods are purchased at market exchange rates, and thus a country that has to import all of its food would appear better off than it actually is if the PPP is used as the measurement of well-being. There i ...
28 pages - World bank documents
28 pages - World bank documents

... and P3P3 are both tangent to an indifference curve U, at points C and D, indicating that the utility of the representative consumer is unchanged. In the case we have illustrated, the production points A and B' lie on the same ray from the origin so that the relative outputs of the two goods are unch ...
Aggregate demand and aggregate supply
Aggregate demand and aggregate supply

... The Effects of a Shift in Aggregate Demand  To sum up, there are three important lessons to remember here: 1. In the short run, shifts in aggregate demand cause fluctuations in the economy’s output of goods and services. 2. In the long run, shifts in aggregate demand affect the overall price level ...
Uncertainty Shocks in a Model of Effective Demand No. 12-15
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... contractions in output and all its components when prices are sticky. In particular, we find that increased uncertainty associated with future demand can produce significant declines in output, hours, consumption, and investment. Our model predicts that a one-standard deviation increase in the uncer ...
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VAR Models in Macroeconomic Research
VAR Models in Macroeconomic Research

... formulated and tested, and the historical dynamics of the data can be examined. The VAR models have the advantage over traditional large-scale macroeconometric models in that the results are not hidden by a large and complicated structure (the "black box"), but are easily interpreted and available. ...
inflation and growth targeting - Faculty of Business and Economics
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Fiscal Policy in an Unemployment Crisis
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... policy transmissions. In both approaches, a rise in government spending increases output and makes the private sector richer through an increase in income – but also poorer through an increase in present value taxation. The net result is a wash. Then, however, the stories diverge. In this paper, the ...
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... the assumed fiscal regime. We are implicitly assuming that the policy regime in place is Ricardian or non fiscalist. For we believe that this is the case of greatest empirical relevance around the developed world. Of course, if one is willing to drop the assumption of Ricardian fiscal policy, then t ...
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... supply shock? Redraw the diagram from part a to illustrate the effect of this shock by shifting the appropriate curve. c. The Housing Price Index, published by the Office of Federal Housing Enterprise Oversight, calculates that U.S. home prices fell by an average of 3.0% in the 12 months between Jan ...
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... (inflation) leads to a rise in interest rates. Investment spending and consumer spending fall. The opposite is true also: lower interest rates will increase AD ...
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... value of the same goods and services using some base year prices. It is possible for nominal GDP to be less than real GDP in a given year. Given the definitions of the two variables, this will occur if prices in that year are simply less than prices in the base year. If, for example, the base year i ...
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... Real GDP is the value at base year prices of production within the borders of a country (call it Country A), whereas Real GNP is the value at base year prices of production using labor and property owned by the residents of a country. Suppose the level of production within the borders of Country A r ...
This PDF is a selection from a published volume
This PDF is a selection from a published volume

... is a frequent phenomenon of such markets: the inflation rate of nontradables is permanently higher than that of tradables, which results in long-run real appreciation of the CPI-based real exchange rate. This phenomenon was documented by Ito, Isard, and Symansky (1997) for the case of Japan and some ...
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I. What Is a Business Cycle?

... some new indexes based on newer statistical methods, but the results were disappointing as the new index failed to predict the recessions that began in 1990 and 2001 i. Because recessions may be caused by sudden shocks, the search for a good index of leading indicators may be fruitless ...
MacroeconoMics for a Modern econoMy
MacroeconoMics for a Modern econoMy

... might know better what quit rates to expect than the employees themselves.) It rested on the impossibility of a contract protecting the employer from all the excuses for quitting the employee might be able to claim. There are also the abuses the employer could inflict on employees to force them to q ...
A Two-Sector Approach to Modeling US NIPA Data
A Two-Sector Approach to Modeling US NIPA Data

... which uses continually updated relative price weights. I follow this procedure in modeling the major real aggregates using a chain-weighting method. The two-sector ...
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Nominal rigidity

Nominal rigidity, also known as price-stickiness or wage-stickiness, describes a situation in which the nominal price is resistant to change. Complete nominal rigidity occurs when a price is fixed in nominal terms for a relevant period of time. For example, the price of a particular good might be fixed at $10 per unit for a year. Partial nominal rigidity occurs when a price may vary in nominal terms, but not as much as it would if perfectly flexible. For example, in a regulated market there might be limits to how much a price can change in a given year.If we look at the whole economy, some prices might be very flexible and others rigid. This will lead to the aggregate price level (which we can think of as an average of the individual prices) becoming ""sluggish"" or ""sticky"" in the sense that it does not respond to macroeconomic shocks as much as it would if all prices were flexible. The same idea can apply to nominal wages. The presence of nominal rigidity is animportant part of macroeconomic theory since it can explain why markets might not reach equilibrium in the short run or even possibly the long-run. In his The General Theory of Employment, Interest and Money, John Maynard Keynes argued that nominal wages display downward rigidity, in the sense that workers are reluctant to accept cuts in nominal wages. This can lead to involuntary unemployment as it takes time for wages to adjust to equilibrium, a situation he thought applied to the Great Depression that he sought to understand.
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