10-01-12-macromodel-revised

10-01-12-macromodel-revised - ClearingOfTheLaborMarket

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Clearing Of The Labor Market Assuming That Wages Are Flexible, Then  Everyone Who Wants A Job At The  Prevailing Wage Can Obtain One. With Stable Loci For Demand And Supply  Of Labor, Output Is Stable For This Labor- Market-Clearing Economy. Ignoring The Interest-Rate Effect Which  Williamson Includes, Y s  = Y 0
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The Demand Structure Of A Simple  Closed Economy Looking At the Goods Market S + T – I – G = 0 S = -a + (1-b)·Y d -c·(w-p) – T C = a + b·Y d + c·(w-p) I = I 0 – h·r T = T 0 G = G 0 A Favorite Value For The Parameter c Is 250. For Williamson, c = 0, And This Is What We Will Assume Most Of The Time.
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Specifics Of Variables S Is Saving, T Is Taxes, I Is Investment, G Is  Government Expenditures, Y d  Is Aggregate  Demand, w Is The Natural Log Of Nominal  Wealth, p Is The Natural Log Of The Price Level a Is The Intercept Term Of The Consumption  Function, b Is The Marginal Propensity To  Consume And Has A Value Between Zero And  One (That Is, It Has A Fractional Value), c And h  Are Parameters.  Favorite Values Are c = 0 And  h = 2000 I 0 , G 0 , And T 0  Are Exogenous Variables.  
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Y s = Y 0 + e·r For Most Of Our Analysis We Will Assume That The Value Of The Parameter e Is Zero. Y
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10-01-12-macromodel-revised - ClearingOfTheLaborMarket

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