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.
Inflation in Sweden Figure Inflation in Sweden 1830 - 2010. Source: SCB. There are four aspects which are interesting when we look at inflation data for Sweden
Price/Feeder Quantity Demanded Quantity Supplied $300 500 1800 270 600 1700 240 700 1600 210 800 1500 180 1000 1400 150 1100 1300 120 1200 1200 90 1300 1100 60 1400 1000 30 1500 90
Under what conditions does the text explain that monetary policy is neutral? If it is neutral under these conditions, why is it still an important economic policy tool? Your answer
You need to choose between two replacement compressor options. One costs $6400 and is 70% efficient. The other costs $9800 and is 85% efficient. Both have an average life of 8 year
The sales counter next to the soft toy display in Shambles receives a customer every 2-4 minutes. Most of these customers (80%) are buying toys and are dealt with by the cashier i
What are the important aspects in tracking the macro-economy? Important aspects in tracking the macro-economy: a. How economists utilizes aggregate measures to track the pre
Suppose you belong to a tennis club that has a monthly fee of $75 and a charge of $5 per hour to play tennis.
"The price of Brent crude oil has hit $111 a barrel and US crude also rose in price, as worries persist about the unrest in Libya". (BBC News, 2011) This quote, from the BBC news w
In real life, the operation of simple multiplier is affected by many leakages. Leakages in the multiplier arise out of the following reasons: (1) Saving: If all the income is sp
Following on papers by Pacala and Socolow,1 The Carbon Mitigation Initiative at Princeton University, http://cmi.princeton.edu/ has summarized carbon stabilization strategies at
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: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd