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.
(40 points) Consider two consumers, A and B. A and B both want perfect consumption smoothing (c = cf) and both have no current wealth. However, the two consumers have different inc
1. Kuhn - Tucker Conditions Max 2x + 3y s.t. pxX + pyY ≤ M. x ≥ 0, y ≥ 0 2. Max (8 + x)(8 + y) s.t. pxX + pyY ≤ M. x ≥ 0, y ≥ 0 Utility function 3. U(x, y)
If equilibrium price falls and the equilibrium quantity of the good purchased decreases, what has happened to either the supply curve or to the demand curve? a. Demand decreased
Sally's Silk Screning produces specialty T-shirts that are primarily sold at special events. She is trying to decide how many to produce for an upcoming event. During the event its
Determine the current productivity results for the non-farming business sector and the manufacturing sector. Discuss recent productivity and cost trends and make predictions for th
What are the Changes in the exchange rate Assume that United States is our home country and that current euro exchange rate in direct notation is SD= 1.5 (euro/USD). In indirec
If the Banking system has $500,000 in demand deposit liabilities, $125,000 in total reserves and a reserve requirement of 15%: What is the maximum amount by which the money supply
what are the objectives of the determinants of investments
This paper empirically analyses the effect of oil price shocks on key macroeconomic indicators in the United Kingdom.The aim of the paper is to establish a relationship between oil
) Consider an economy where individuals live for 2 periods and have prefer- ences represented by ln(c) + ß ln(c') where c and c' represent consumption in the first and second perio
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