10-01-27a

10-01-27a - Introduction To Keynesian Models These Slides...

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Introduction To Keynesian Models These Slides Show How Our Y ,
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Keynesian Analysis The Keynesian Model Assumes That Prices Are Given In The Short Run, And That The Market-Clearing Equation For The Labor Market (The Y s Locus) Can Be Ignored (In The Short Run). The Value Of The Price Level In The Short Run Is Chosen As P = 2.7 (So That Its Natural Logarithmic Value, p, Is Equal to 1.)
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Equations For Keynesian Model S + T – I – G = 0 S = -a + (1-b)·Y d – T = -70 + .33·Y d - T C = a + b·Y d = +70 + .67·Y d I = I 0 – h·r = 190 – 1000·r T = T 0 = 300 G = G 0 = 300
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The Y d Equation -a +(1-b)·Y d - T 0 + T 0 – I 0 +h·r – G 0 = 0 So, Y d = (a + G + I 0 )/(1-b) – h·r/(1-b) Or, In Numbers, Y d = 1680 – 3000·r
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The LM Curve, With d = 0 m s T = p + m d 0 +.00067·Y - l ·r Or Y = 1500·(m s T – p – m d 0 + l ·r) Substituting In Our Favorite Numbers For The Benchmark Model, We Get: Y = 1500·(7 – 1 – 5.12 + 2·r) Simplifying Y = 1320 + 3000·r
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This note was uploaded on 07/16/2011 for the course ECON 2154 taught by Professor Boyer during the Winter '10 term at UWO.

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10-01-27a - Introduction To Keynesian Models These Slides...

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