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Unformatted text preview: Three Kinds of Stickiness The Phillips Curve The Phillips Curve And the US Economy Hysteresis vs the Natural Rate Hypothesis Homework Intermediate Macroeconomics Chapter 13: Aggregate Supply The ShortRun Tradeoff Between Inflation and Unemployment Instructor Geoffrey Williams Rutgers University October 22 Instructor Geoffrey Williams Chapter 13: Aggregate Supply Three Kinds of Stickiness The Phillips Curve The Phillips Curve And the US Economy Hysteresis vs the Natural Rate Hypothesis Homework Outline 1 Three Kinds of Stickiness 2 The Phillips Curve 3 The Phillips Curve And the US Economy 4 Hysteresis vs the Natural Rate Hypothesis 5 Homework Instructor Geoffrey Williams Chapter 13: Aggregate Supply Three Kinds of Stickiness The Phillips Curve The Phillips Curve And the US Economy Hysteresis vs the Natural Rate Hypothesis Homework Sticky Prices and Supply Instructor Geoffrey Williams Chapter 13: Aggregate Supply Three Kinds of Stickiness The Phillips Curve The Phillips Curve And the US Economy Hysteresis vs the Natural Rate Hypothesis Homework The StickyPrice Model The StickyWage Model The Imperfect Information Model Summary of the three models Three Kinds of Stickiness Economists disagree about aggregate supply, and so we will look at three theories: 1 The StickyPrice Model 2 The StickyWage Model 3 The Imperfect Information Model Each of these theories is working towards an SRAS equation that looks like Y = ¯ Y + α ( P P e ) with α > Instructor Geoffrey Williams Chapter 13: Aggregate Supply Three Kinds of Stickiness The Phillips Curve The Phillips Curve And the US Economy Hysteresis vs the Natural Rate Hypothesis Homework The StickyPrice Model The StickyWage Model The Imperfect Information Model Summary of the three models What the SRAS Will Look Like Instructor Geoffrey Williams Chapter 13: Aggregate Supply Three Kinds of Stickiness The Phillips Curve The Phillips Curve And the US Economy Hysteresis vs the Natural Rate Hypothesis Homework The StickyPrice Model The StickyWage Model The Imperfect Information Model Summary of the three models The Idea We begin with the assumption that firms have some monopoly power, and hence can set prices. They are no longer just price takers A firm thinks about two things when it sets its price: Overall price level P : ⇑ P ⇒⇑ firm costs ⇒⇑ prices the firm would like to charge Aggregate income Y : ⇑ Y ⇒⇑ demand for firm’s product ⇒⇑ firm’s costs ⇒⇑ firm’s price The firm’s ideal becomes: p = P + a ( Y ¯ Y ) Instructor Geoffrey Williams Chapter 13: Aggregate Supply Three Kinds of Stickiness The Phillips Curve The Phillips Curve And the US Economy Hysteresis vs the Natural Rate Hypothesis Homework The StickyPrice Model The StickyWage Model The Imperfect Information Model Summary of the three models The Idea We begin with the assumption that firms have some monopoly power, and hence can set prices....
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 Fall '10
 MacroWilliams,MicroYoshi
 Economics, Inflation, Phillips Curve, Unemployment, Supply And Demand, Natural rate of unemployment

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