Macroeconomics 111 - Chapter 16

Macroeconomics 111 - Chapter 16 - CHAPTER 16 Macroeconomic...

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CHAPTER 16 – Macroeconomic Viewpoints: New Keynesian, Monetarist, And New Classical Keynesian Economics -Follows the work of John Maynard Keynes and the General Theory -Emphasizes the dominant role of aggregate demand in the determination of GDP and employment -Assumes fixed prices (HORIZONTAL AS) at all relevant levels of GDP. This is consistent with the Keynesian belief that inflation is not a risk when unemployment is high, as it was during the depression -Emphasizes the role of government in stabilizing the economy by managing aggregate demand through FISCAL POLICY New Keynesians -Argue for polices similar to tradition Keynesians -Believe that government must take an active role in the economy to restore equilibrium -Believe the private sector is an important source of shifts in aggregate demand -Monetary and fiscal polices should be pursued to offset drops in private sector spending -Believe the prices and wages are quite rigid (“Sticky”) on the short run -Disequilibrium prevails -Explain the price-wage stickiness by focusing on structural impediments to adjustment that
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This note was uploaded on 04/07/2008 for the course ECON 111 taught by Professor H during the Spring '07 term at UConn.

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Macroeconomics 111 - Chapter 16 - CHAPTER 16 Macroeconomic...

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