26 - Macro Chp 7 The Classical Long-Run Model Classical...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Macro 10/26/09 Chp 7 The Classical Long-Run Model Classical Model -Long-run – the economy operates close to its potential output. At full employment -useful in explaining the long-run trend Keynesian Model -understand economic fluctuations – movements in output around its long-run trend The Classical Model Assumption: Markets clear -adjustment of prices until quantities supplied and demanded are equal Quantity of output produced -identify markets -identify buyers and sellers -identify the market structure The Labor Market Labor Supply Curve -how many people want to work at various real wage rates -slopes upward- as the wage rate increases Labor Demand Curve -how many workers firms want to hire at various real wage rates -slopes downward – as the wage rate increases The Labor Market Markets clear: economy achieves full employment on its own Wage rate > equilibrium wage rate -excess supply of labor Wage rate < equilibrium wage rate -excess demand of labor Determining the Economy’s Output Assumptions
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 01/27/2010 for the course ANTHR 1 taught by Professor Chatterjee during the Spring '10 term at Accreditation Commission for Acupuncture and Oriental Medicine.

Page1 / 3

26 - Macro Chp 7 The Classical Long-Run Model Classical...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online