Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
The problem with the Keynesian model
We can classify two problems with the Keynesian model as developed so far:
1. Π is exogenous. Although inflation may temporarily deviate from wage inflation, this deviation can't be too large and it can't last for too long (since real wages would become unreasonable low or unreasonable high). This model has no determination of Πw and hence no complete determination of Π. A model which predicts an inflation of around 6% by presuming a wage inflation of 6% isn't very useful. Keynesian model with inflation is hence incomplete.
2. It is quite unreasonable to presume that Πw would be independent of Y. More reasonable would be to model Π Was a positive function of Y. If we are in a boom, L would be above its average and unemployment below its average. In such a situation, it's reasonable to expect wage inflation to increase.
To solve these problems, we have to make Πw endogenous. We do this by Keynesian model adding the Phillips curve.
Including different interest rates with different maturities would complicate the models however it wouldn't buy you very much. Because interest rates with different maturities are
using the ppf model explain the principles of economics of allocative efficiency
State the market for overnight loans Overnight interest rates are rates for loans over a single night - these are the shortest of all interest rates. During the day, banks norm
Explain why P=MC in the short-run equilibrium of the perfectly competitive firm, whereas in the long-run equilibrium P=MC=AC.
An investor has a choice of 2 investment opportunities. The first investment yields a gain of $2800 with probability of 0.37, a gain of $1100 with probability of 0.27, and otherwis
Why is quantitative easing used during liquidity trap when it lowers interest rates too?
iN BOTH CITIES, AN INCREASE IN INCOME COMBINED WITH EXPECTATIONS OF A STRONG MARKET SHIFTED DEMAND AND CAUSED PRICES TO RISE RAPLIDLY DURING THE MID-TO LATE 1980S. Illustrate with
Trade in Services - strategic considerations: India has emerged as a major exporter of services, bringing about a change in our negotiating position at the WTO. India's trade
INTERDEPENDENCE OF MACROECONOMICS AND MICROECONOMICS In microeconomics, the underlying assumption is that the total output, total employment and total spending are given. It th
subjective questions on national income determination
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd