srintro - E202 Short-Run Intro Schools of Economic Thought...

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E202 – Short-Run Intro 1 1936 1776 1848 1868 1890 1798 1817 1874 Karl Marx : Das Kapital Adam Smith : The Wealth of Nations Thomas Malthus : Essay on Population David Ricardo : Principles of Political Economy and Taxation John Stuart Mill : Economy Alfred Marshall : Principles of Economics Leon Walras : Elements d'economie politique pure CLASSICAL KEYNESIAN John Maynard Keynes : Paul Samuelson Franco Modigliani Milton Friedman James Tobin Sir John Hicks NEO-CLASSICAL SYNTHESIS The General Theory of Employment, Interest, and Money Schools of Economic Thought SCHOOLS OF THOUGHT School View of Prices View of Economy Classical 1776 Flexible Smoothly self-regulating Keynesian 1930s Rigid Rigid prices; no automatic adjustment Neo-Classical Synthesis 1960s Sticky Sticky prices; slow automatic adjustment NEOCLASSICAL SYNTHESIS OVERVIEW Short-Run Market Supply Demand Goods P sticky Q adjusts to AD AD = C + I + G + EX – IM Labor W sticky L adjusts to LD LD determined by Q Asset markets i determined by monetary policy (Bank Reserve market) Long-Run Market Supply Demand Goods P flexible Q determined by factor availability Adjusts via Δ P so that Q = Qbar Labor W flexible L = Lbar Adjusts via Δ W so that L = Lbar (full employment) Asset markets r determined by borrowing/lending (Loanable Funds market)
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srintro - E202 Short-Run Intro Schools of Economic Thought...

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