Lecture+5+Econ+221+Fall+19.pptx - Lecture Outline \u2022 The algebra of the IS-LM model \u2022 Aggregate supply \u2013 SRAS LRAS and equilibrium \u2013 SR and LR

Lecture+5+Econ+221+Fall+19.pptx - Lecture Outline u2022...

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Lecture Outline The algebra of the IS-LM model Aggregate supply SRAS, LRAS and equilibrium SR and LR effects of IS shocks SR and LR effects of money shocks Monetary neutrality The algebra of the AD-AS model
Labor Market
Labor Market (cont.) Setting ND = NS = N, we get a system of two equations in the two unknowns w and N 1 2 0 ( ) (1 ) w w A f f N N n n t w
Solve by substitution: 1 2 0 ( ) (1 ) w w A f f N N n n t w 1 2 0 2 1 2 0 2 1 2 0 1 2 0 2 (1 ) (1 ) 1 (1 ) 1 (1 ) w w w w w A f f n n t w w Af n t w A f f n w Af n t A f f n A f f n w Af n t
1 2 0 0 2 0 2 1 2 0 2 0 1 2 (1 ) 1 (1 ) 1 (1 ) (1 ) 1 (1 ) (1 ) 1 (1 ) w w w w w w w A f f n N n n t Af n t n Af n t n t A f f n N Af n t n n t Af N Af n t
Labor Market (cont.)
Goods Market
Goods Market (cont.)

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