3040_ABC_11_2015.10.14 rev-2 (3) - Chapter Outline Rigidity...

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Chapter OutlineRigidity of Real-Wage Stickiness in PriceMonetary and Fiscal Policy in Keynesian ModelThe Keynesian Theory of Business Cycles and Macroeconomic Stabilization1
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3Critique of Classical School on Keynesians:The Classical School view is rooted in the micro-foundations of macro-economics- Market clearing equilibrium is the ‘only game in town’;- Keynesianism is jerry-built.
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5What wage is inflexible?Keynes initially assumed money wage was downward inflexible, not real wage. Why? Workers may not reject a fall of the real wage, due to
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Figure 11.2 Excess supply of labor and the realwageMaybe the real wage is ‘efficient’9

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