BarroPP-III.C-E - An Equilibrium Business-Cycle Model...

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Macroeconomics - Barro Chapter 8 1 An Equilibrium Business-Cycle Model Conceptual Issues Assuming that these fluctuations reflect shocks to the economy. Change in level of technology Y = A · F ( K , L ) An increase in A means that the economy is more productive. A decrease in A means that the economy is less productive.
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Macroeconomics - Barro Chapter 8 2 An Equilibrium Business-Cycle Model The Model Y = A · F ( K , L ) the capital stock, K , as fixed in the short run, the labor input, L , is fixed. Changes in Y will reflect only changes in A . When A rises, Y rises, When A falls, Y falls.
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Macroeconomics - Barro Chapter 8 3 An Equilibrium Business-Cycle Model The Model The marginal product of labor and the real wage rate An increase in the technology level, A , raises the marginal product of labor, MPL, for given inputs of capital, K , and labor, L .
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Macroeconomics - Barro Chapter 8 4 An Equilibrium Business-Cycle Model
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Macroeconomics - Barro Chapter 8 5 An Equilibrium Business-Cycle Model The Model Marginal product of capital, real rental price, and the interest rate An increase in the technology level, A , raises the marginal product of capital, MPK, for given inputs of capital, K , and labor, L
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Macroeconomics - Barro Chapter 8 6 An Equilibrium Business-Cycle Model
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Macroeconomics - Barro Chapter 8 7 An Equilibrium Business-Cycle Model The Model Marginal product of capital, real rental price, and the interest rate i = R / P δ i = MPK ( evaluated at given K and L ) − δ An increase in the technology level raises the marginal product of capital, MPK, at given inputs of capital, K , and labor, L .
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Macroeconomics - Barro Chapter 8 8 An Equilibrium Business-Cycle Model The Model Marginal product of capital, real rental price, and the interest rate An increase in the technology level raises the marginal product of capital, MPK, at given inputs of capital, K , and labor, L . The model predicts that an economic boom will have a relatively high interest rate, whereas a recession will have a relatively low interest rate.
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Chapter 8 9 An Equilibrium Business-Cycle Model The Model Consumption, saving, and investment C + ∆K = A · F ( K , L ) − δ K depreciation, δK , is fixed in the short run,
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This note was uploaded on 02/19/2011 for the course ECON 251 taught by Professor Blanchard during the Spring '08 term at Purdue University-West Lafayette.

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BarroPP-III.C-E - An Equilibrium Business-Cycle Model...

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