Chapter+11+_The+Labor+Market_

Chapter+11+_The+Labor+Market_ - A Quick Summary of Main...

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A Quick Summary of Main Points
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Y < Y P u > u n u c > 0 Y > Y P u < u n u c < 0 Y = Y P u = u n u c = 0 Long Run So what causes variations in Y? Answer: Aggregate Demand
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AD > Y Y↑ AD = Y Good Market Equilibrium Y= AD AD↑ AD > Y Y↓ AD = Y AD↓ But what causes AD to change?
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AD = C + I + G AD↑ C↑ I↑ G↑ TX ↓ or TR↑ Y d Assuming: Fixed Prices & Fixed Interest Rates ∆Y = 1 1 − MPC × ∆AD Since the interest rate affects C and I…. Y↑
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Money Market Equilibrium M d = M M ×V = P × Y Classical Model: M d depends on P × Y M = k × P × Y V (and hence k ) is constant, so k = 1 V
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Money Market Equilibrium ∆M M = ∆P P + ∆Y Y P = M × V Y M ×V = P × Y
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Money Market Equilibrium M d = M Keynesian Model M d also depends on r r↑ → M d r↓ → M d
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Loanable-Funds Market Equilibrium D LF = S LF Fisher Effect Π e ↑ → r↑ Π e ↓ → r↓
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Saving-Investment Relationship S = I + (G + TR – TX) Goods Market Equilibrium Allowing r to Change Dollar-for-Dollar Crowding Out Fiscal Policy Totally Ineffective
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Chapter 11 The Labor Market 10
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Labor Market Firms Demand Labor Households Supply Labor
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This note was uploaded on 04/03/2012 for the course ECN 001B 1b taught by Professor Baghermodjtahedi during the Spring '10 term at UC Davis.

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Chapter+11+_The+Labor+Market_ - A Quick Summary of Main...

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