Neo-classical synthesis, Macroeconomics

Assignment Help:

Neo-classical synthesis is a synthesis of classical model and Keynesian model. In brief, it states that Keynesian model is correct in the short run whereas the classical analysis is correct in the long run. 

Let's consider a concrete instance. According to Keynesian model, an increase in G will increase Y and decrease unemployment. In the classical model, an increase in G would have no effect at all on Y and unemployment. In neo-classical synthesis, an increase in G will create a temporary increase in Y however Y will return to its original value after some time. 

To justify neo-classical synthesis, it's helpful to identify the problem with classical model in the short run and problem with the Keynesian model in the long run. As for classical model in the short run, we figured out that within this model, it's difficult to describe deep recessions with high involuntary unemployment. In the long run, it's more reasonable to believe that the economy can get out of the recession by itself. Problem with the Keynesian model in the long run, as we would see, is assumption of a stable Phillips curve.


Related Discussions:- Neo-classical synthesis

Unemployment, Find the labor force, the working-age population, the number ...

Find the labor force, the working-age population, the number of employed workers, and the number of unemployed workers. Unemployment rate 5.60 % Participation rate 62.50

Normal population standard deviation, A normal population has a mean of 12....

A normal population has a mean of 12.2 and a standard deviation of 2.5. A) Compute the Z value associated with 14.3. B) What proportion of the population is between 12.2 and 14.3.?

Solve equilibrium price and the equilibrium quantity, Suppose that a widget...

Suppose that a widget market is described by the following supply and demand equations. Supply: Q = 3 P Demand: Q =400 - P a. Solve for the equilibrium price and the

Liberalisation and changing sources of fdi, Liberalisation and Changing Sou...

Liberalisation and Changing Sources of FDI: European countries  had been major sources of FDI inflows  to India until 1990. However, their relative importance declined in the

National Income, distnguish betweenNational income at market price and Nati...

distnguish betweenNational income at market price and National Income at factor cost, explain the importance of the distinction

Paper mill and downstream box mill, Suppose that a paper mill "feeds " a d...

Suppose that a paper mill "feeds " a downstream box mill. For the downstream mill, the marginal profitability of producing boxes declines with volume. For example, the first unit o

Mercantilist economists, Evaluate the mercantilist economists. Determine wh...

Evaluate the mercantilist economists. Determine which economist you feel made the most significant contribution to economic theory. Provide at least two (2) reasons to support your

Fiscal stimulas, Suppose the consumption function is C = $500 billion + 0.5...

Suppose the consumption function is C = $500 billion + 0.55Y and the government wants to stimulate the economy. By how much will aggregate demand at current prices shift initially

Describe in short about money in economics, Describe in short about Money ...

Describe in short about Money "Money" in economics is actually not as simple to understand as you may think and many use the term money in a way inconsistent with how it's defi

Determine a decrease in lump sum taxes, Using Simple Keynesian Model, discu...

Using Simple Keynesian Model, discuss the effect of the following: a) An increase in govt. expenditure. b) A decrease in lump sum taxes. In this context compare the govt.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd