10-01-27a (1)

# 10-01-27a (1) - I ntroduction To Keynesian Models These...

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Unformatted text preview: I ntroduction To Keynesian Models These Slides Show How Our Y , Keynesian Analysis • The Keynesian Model Assumes That Prices Are Given I n The Short Run, And That The Market-Clearing Equation For The Labor Market (The Y s Locus) Can Be I gnored (I n The Short Run). • The Value Of The Price Level I n The Short Run I s Chosen As P = 2.7 (So That I ts Natural Logarithmic Value, p, I s Equal to 1.) 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 – h·r = 190 – 1000·r • T = T = 300 • G = G = 300 The Y d Equation •-a +(1-b)·Y d - T 0 + T – I +h·r – G = 0 • So, Y d = (a + G + I )/(1-b) – h·r/(1-b) • Or, I n Numbers, • Y d = 1680 – 3000·r The LM Curve, With d = 0 • m s T = p + m d +.00067·Y - l ·r • Or Y = 1500·(m s T – p – m d + 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 Two Equations, Two...
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10-01-27a (1) - I ntroduction To Keynesian Models These...

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