Survey
* Your assessment is very important for improving the work of artificial intelligence, which forms the content of this project
Download New Classical View Self
Document related concepts
no text concepts found
Transcript
Classical Economics and Keynes Classical Theory Keynesian View Causes of Macro Instability Real Business Cycle View 19 C HAPTE R Does the Economy SelfCorrect? New Classical View of Self-Correction Rules or Discretion Rationale for Monetary Rule Key Terms Previous Slide End Show 19 - 1 Disputes Over Macro Theory and Policy Next Slide Copyright McGraw-Hill/Irwin, 2005 CLASSICAL ECONOMICS AND KEYNES Classical Economics and Keynes Classical Theory Keynesian View Causes of Macro Instability Real Business Cycle View Does the Economy SelfCorrect? New Classical View of Self-Correction Rules or Discretion Rationale for Monetary Rule Key Terms Previous Slide End Show 19 - 2 Next Slide Classical Economics Adam Smith - 1776 Laissez-faire The Classical View Vertical Aggregate Supply Curve Stable Aggregate Demand Real Output Depends Upon… •Say’s Law •Responsive, Flexible, Prices and Wages Copyright McGraw-Hill/Irwin, 2005 Classical Theory Classical Economics and Keynes AS Classical Theory Keynesian View Real Business Cycle View Does the Economy SelfCorrect? New Classical View of Self-Correction Rules or Discretion Rationale for Monetary Rule Price Level Causes of Macro Instability P1 AD1 Key Terms Previous Slide End Show 19 - 3 Next Slide Qf Real Domestic Output Copyright McGraw-Hill/Irwin, 2005 Classical Theory Classical Economics and Keynes AS Classical Theory Keynesian View Real Business Cycle View Does the Economy SelfCorrect? New Classical View of Self-Correction Rules or Discretion Rationale for Monetary Rule Price Level Causes of Macro Instability P1 P2 AD1 Key Terms AD2 Previous Slide End Show 19 - 4 Next Slide Qf Real Domestic Output Copyright McGraw-Hill/Irwin, 2005 CLASSICAL ECONOMICS AND KEYNES Classical Economics and Keynes Classical Theory Keynesian View Causes of Macro Instability Real Business Cycle View Does the Economy SelfCorrect? New Classical View of Self-Correction Rules or Discretion Rationale for Monetary Rule Key Terms Previous Slide End Show 19 - 5 Next Slide Keynesian Economics John Maynard Keynes, 1930s The Keynesian View Prices and Wages Downwardly Inflexible Active Government Policy Required to Stabilize the Economy Horizontal Aggregate Supply Curve to Full-Employment Unstable Aggregate Demand Copyright McGraw-Hill/Irwin, 2005 Keynesian View Classical Economics and Keynes AS Classical Theory Keynesian View Real Business Cycle View Does the Economy SelfCorrect? New Classical View of Self-Correction Rules or Discretion Rationale for Monetary Rule Price Level Causes of Macro Instability P1 AD1 Key Terms Previous Slide End Show 19 - 6 Next Slide Qf Real Domestic Output Copyright McGraw-Hill/Irwin, 2005 Keynesian View Classical Economics and Keynes AS Classical Theory Keynesian View Real Business Cycle View Does the Economy SelfCorrect? New Classical View of Self-Correction Rules or Discretion Rationale for Monetary Rule Price Level Causes of Macro Instability P1 AD1 Key Terms AD2 Previous Slide End Show 19 - 7 Next Slide Qu Qf Real Domestic Output Copyright McGraw-Hill/Irwin, 2005 CAUSES OF MACRO INSTABILITY Classical Economics and Keynes Classical Theory Keynesian View Causes of Macro Instability Real Business Cycle View Does the Economy SelfCorrect? New Classical View of Self-Correction Rules or Discretion Rationale for Monetary Rule Mainstream View Changes in Investment Ca + Ig + Xn + G = GDP Adverse Aggregate Supply Shocks Monetarist View Equation of Exchange Key Terms M V = P Q = GDP Previous Slide End Show 19 - 8 Next Slide Stable Velocity Copyright McGraw-Hill/Irwin, 2005 CAUSES OF MACRO INSTABILITY Classical Economics and Keynes Classical Theory Keynesian View Causes of Macro Instability Real Business Cycle View Does the Economy SelfCorrect? New Classical View of Self-Correction Rules or Discretion Rationale for Monetary Rule Summary Mainstream View Instability of Investment is the Main Cause of Output Changes Monetary Policy is a Stabilizing Factor Monetarist View Key Terms Previous Slide End Show 19 - 9 Next Slide With a Stable Velocity, Nominal GDP Depends Upon the Money Supply Copyright McGraw-Hill/Irwin, 2005 Real Business Cycle View Classical Economics and Keynes Real-Business-Cycle Theory ASLR1 Classical Theory Keynesian View Real Business Cycle View Does the Economy SelfCorrect? New Classical View of Self-Correction Rules or Discretion Rationale for Monetary Rule Price Level Causes of Macro Instability P1 AD1 Key Terms Previous Slide End Show 19 - 10 Next Slide Q1 Real Domestic Output Copyright McGraw-Hill/Irwin, 2005 Real Business Cycle View Classical Economics and Keynes Real-Business-Cycle Theory ASLR2 ASLR1 Classical Theory Keynesian View Real Business Cycle View Does the Economy SelfCorrect? New Classical View of Self-Correction Rules or Discretion Rationale for Monetary Rule Price Level Causes of Macro Instability P1 AD1 Key Terms Previous Slide End Show 19 - 11 Next Slide Q2 Q 1 Real Domestic Output Copyright McGraw-Hill/Irwin, 2005 Real Business Cycle View Classical Economics and Keynes Real-Business-Cycle Theory ASLR2 ASLR1 Classical Theory Keynesian View Real Business Cycle View Does the Economy SelfCorrect? New Classical View of Self-Correction Rules or Discretion Rationale for Monetary Rule Price Level Causes of Macro Instability Recession With Stable Price Levels P1 AD1 AD2 Key Terms Previous Slide End Show 19 - 12 Next Slide Q2 Q 1 Real Domestic Output Copyright McGraw-Hill/Irwin, 2005 Real Business Cycle View Classical Economics and Keynes Real-Business-Cycle Theory ASLR2 ASLR1 Classical Theory Keynesian View Causes of Macro Instability Does the Economy SelfCorrect? New Classical View of Self-Correction Rules or Discretion Rationale for Monetary Rule Recession With Stable Price Levels Coordination P Failures Price Level Real Business Cycle View 1 AD1 AD2 Key Terms Previous Slide End Show 19 - 13 Next Slide Q2 Q 1 Real Domestic Output Copyright McGraw-Hill/Irwin, 2005 DOES THE ECONOMY SELF-CORRECT? Classical Economics and Keynes New Classical View Classical Theory Keynesian View Causes of Macro Instability Real Business Cycle View Does the Economy SelfCorrect? New Classical View of Self-Correction Rules or Discretion Rationale for Monetary Rule Key Terms Previous Slide End Show 19 - 14 Next Slide Self-Correction? Rational Expectations Theory Speed of Adjustment Unanticipated Price Changes “Price Level Surprises” Fully Anticipated Price-Level Changes Copyright McGraw-Hill/Irwin, 2005 NEW CLASSICAL VIEW OF SELF-CORRECTION An increase in AD ASLR Classical Economics and Keynes AS1 Classical Theory Causes of Macro Instability Real Business Cycle View Does the Economy SelfCorrect? New Classical View of Self-Correction Rules or Discretion Rationale for Monetary Rule Price Level Keynesian View SelfCorrection P1 a Key Terms AD1 Previous Slide End Show 19 - 15 Next Slide Q1 Real Domestic Output Copyright McGraw-Hill/Irwin, 2005 NEW CLASSICAL VIEW OF SELF-CORRECTION An increase in AD ASLR Classical Economics and Keynes AS1 Classical Theory Causes of Macro Instability Real Business Cycle View Does the Economy SelfCorrect? New Classical View of Self-Correction Rules or Discretion Rationale for Monetary Rule Price Level Keynesian View Selfb Correction P2 P1 a Key Terms AD2 AD1 Previous Slide End Show 19 - 16 Next Slide Q1 Real Domestic Output Copyright McGraw-Hill/Irwin, 2005 NEW CLASSICAL VIEW OF SELF-CORRECTION An increase in AD ASLR Classical Economics and Keynes AS2 Classical Theory AS1 Causes of Macro Instability Real Business Cycle View Does the Economy SelfCorrect? New Classical View of Self-Correction Rules or Discretion Rationale for Monetary Rule Price Level Keynesian View Selfc b Correction P3 P2 P1 a Key Terms AD2 AD1 Previous Slide End Show 19 - 17 Next Slide Q1 Real Domestic Output Copyright McGraw-Hill/Irwin, 2005 DOES THE ECONOMY SELF-CORRECT? Classical Economics and Keynes Mainstream View Classical Theory Keynesian View Causes of Macro Instability Real Business Cycle View Does the Economy SelfCorrect? New Classical View of Self-Correction Rules or Discretion Rationale for Monetary Rule Key Terms Previous Slide End Show 19 - 18 Next Slide Downward Wage Inflexibility Efficiency Wage Theory •Greater Work Effort •Lower Supervision Costs •Reduced Job Turnover Insider-Outsider Theory and Relationships Copyright McGraw-Hill/Irwin, 2005 RULES OR DISCRETION? Classical Economics and Keynes Classical Theory Keynesian View Causes of Macro Instability Real Business Cycle View Does the Economy SelfCorrect? New Classical View of Self-Correction Rules or Discretion Rationale for Monetary Rule Key Terms Previous Slide End Show 19 - 19 Next Slide In Support of Policy Rules Monetary Rule Balanced Budget In Defense of Discretionary Stabilization Policy Discretionary Monetary Policy Discretionary Fiscal Policy Increased Macro Stability Copyright McGraw-Hill/Irwin, 2005 RATIONALE FOR A MONETARY RULE Classical Economics and Keynes Federal Reserve Increases Money Supply at the Long-Run Growth Rate of GDP ASLR1 ASLR2 Classical Theory Keynesian View Real Business Cycle View Does the Economy SelfCorrect? New Classical View of Self-Correction Rules or Discretion Rationale for Monetary Rule Key Terms Price Level Causes of Macro Instability Fed Increases The Money Supply Resulting in… P1 P2 AD1 Previous Slide End Show 19 - 20 Next Slide Q1 Q 2 Real Domestic Output, GDP Copyright McGraw-Hill/Irwin, 2005 RATIONALE FOR A MONETARY RULE Classical Economics and Keynes Federal Reserve Increases Money Supply at the Long-Run Growth Rate of GDP ASLR1 ASLR2 Classical Theory Keynesian View Growth Without Inflation or Deflation Real Business Cycle View Does the Economy SelfCorrect? New Classical View of Self-Correction Rules or Discretion Rationale for Monetary Rule Key Terms Previous Slide End Show 19 - 21 Price Level Causes of Macro Instability P1 P2 Next Slide AD2 AD1 Q1 Q 2 Real Domestic Output, GDP Copyright McGraw-Hill/Irwin, 2005 classical view Keynesian view monetarism equation of exchange velocity real-business-cycle theory coordination failures rational expectations theory new classical economics price-level surprises efficiency wage insider-outsider theory monetary rule Copyright McGraw-Hill/Irwin, Inc. 2005 BACK END Classical Economics and Keynes Classical Theory Next: Keynesian View Causes of Macro Instability Real Business Cycle View Does the Economy SelfCorrect? New Classical View of Self-Correction Elasticity of Demand and Supply Rules or Discretion Rationale for Monetary Rule Key Terms Previous Slide End Show 19 - 23 Next Slide Chapter 20 Copyright McGraw-Hill/Irwin, 2005
Related documents