Intermediate Macroeconomics Lecture 9
Intermediate Macroeconomics Lecture 9
Questions from Last Lecture 令 Demand for money↑ =L(r,Y D↑ while s fixed L(r,Y: hold r&ly to balance the pressure of dt; holdY, tr to balance Y
Questions from Last Lecture ❖ Demand for money ↑ D ↑while S fixed → L(r,Y): hold r &↓Y to balance the pressure of D ↑; hold Y, ↑r to balance ( , ) s d M M M L r Y P P P − − = = = r Y LM IS
IS-LM as a Theory of Aggregate Demand oIS-LM model shows the relationship between r and Y at a given price level o What if P changes? P↑→(MP A/P2 M/P1 L(〔,Y) W/P
IS-LM as a Theory of Aggregate Demand ⚫IS-LM model shows the relationship between r and Y at a given price level ⚫What if P changes? P↑→ (M/P)↓ M/P2 P2 AD r M/P L(r,Y) M/P1 Y r IS LM P1 P Y
IS-LM as a Theory of Aggregate Demand o Change in monetary policy S AD
IS-LM as a Theory of Aggregate Demand ⚫Change in monetary policy r Y IS LM AD Y P
IS-LM as a Theory of Aggregate Demand ● Change in Fiscal Policy S AD
IS-LM as a Theory of Aggregate Demand ⚫Change in Fiscal Policy r Y IS LM AD Y P
Aggregate Supply 0 4 models of as iNflation unemployment the philips curve o New Keynesian economics
Aggregate Supply ⚫4 models of AS ⚫Inflation, unemployment & the Philips curve ⚫New Keynesian economics
4 Models of as 1. The sticky-wage model P AS P↑ real wage(W/P)I labor employment↑ →Y个 W/P Y
4 Models of AS 1. The sticky-wage model P↑ → real wage (W/P)↓ → labor employment↑ → Y ↑ L W/P L Y Y P AS
4 Models of as o Two parties set the nominal wage based on target real wage and their expected price level W=a×Pe W/P=0×(PP) P个→"<D→L个→Y个
4 Models of AS ⚫ Two parties set the nominal wage based on target real wage and their expected price level e W W P P = e W = P W / P (P / P) e = W P L Y P
4 Models of as 2. The worker-misperception model Wages are free to equilibrate s d However Workers temporarily confuse real and nominal wage(or workers do not know what the true price level is so that they have no idea of what the real wage is)
4 Models of AS 2. The worker-misperception model Wages are free to equilibrate S & D However, Workers temporarily confuse real and nominal wage (or workers do not know what the true price level is so that they have no idea of what the real wage is)
4 Models of as Labor s and labor d now based on different real wage rates =(W/P L=L(W/P°)
4 Models of AS ⚫ Labor S and labor D now based on different real wage rates L L (W / P) d d = ( / ) s s e L = L W P
