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10-01-27

# 10-01-27 - KeynesianAnalysis ,And...

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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.)
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 - T  + 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
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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10-01-27 - KeynesianAnalysis ,And...

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