The keynesian view

The keynesian view - Lecture #17 The Keynesian View Econ...

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Econ 1110, Spring 2008, Professor Te 1 Lecture #17 The Keynesian View
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Econ 1110, Spring 2008, Professor Te 2 The Keynesian View: Price Stickiness Pricing Behavior: Monopolistic Competition with Menu Costs Price setter Keep nominal price fixed until conditions change substantially Production Behavior Meet demand at fixed price Profitable because P > MC Employment Behavior Effective labor demand: ND e ( Y )
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Econ 1110, Spring 2008, Professor Te 3 Monetary Policy in the Keynesian Model Increase in Money Supply Short run Y increases r decreases C increases I increases Long run Money is neutral
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Econ 1110, Spring 2008, Professor Te 4 F , H E FE IS LM 1 LM 2 Increase in the Money Supply: Keynesian IS - LM Model Output, Y r Y _
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Econ 1110, Spring 2008, Professor Te 5 Output, Y Y P P 2 P 1 E H F AD 1 AD 2 SRAS 1 SRAS 2 LRAS Increase in the Money Supply: Keynesian AD - AS Model
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Econ 1110, Spring 2008, Professor Te 6 r Output, Y _ IS 1 IS 2 FE LM 2 LM 1 F E H Increase in G and/or Cut in T : Keynesian IS - LM Model Y “Crowding out”
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The keynesian view - Lecture #17 The Keynesian View Econ...

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