UW-Madison ECON 102 - Chapter 15 (3 pages)

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Chapter 15



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Chapter 15

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The Modern Neo-Keynesian Model: From the Short Run to the Long Run, How wage and price changes move the economy naturally back to full employment, Liquidity Trap, Political Business Cycles


Lecture number:
23
Pages:
3
Type:
Lecture Note
School:
University of Wisconsin, Madison
Course:
Econ 102 - Principles of Macroeconomics
Edition:
1
Documents in this Packet

Unformatted text preview:

Econ 102 1st Edition Lecture 23 Outline of Last Lecture I Derivatives II Making a Loan III Risk in the Housing Market IV Securitization V The Inside Job Part III The Crisis VI How we got the Financial Crisis Outline of Current Lecture I Exam 3 II Chapter 15 Current Lecture I Exam 3 Final a Equal weight as other two midterms b Use old exams i she will most likely recycle some multiple questions ii Look at short answers and grade yourself using the answer key c No opinion questions like the first two II Chapter 15 a A lot of review from Chapter 9 i Aggregate Demand and Aggregate Supply Model These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute ii Monday we ll pull together all the graphs b The Modern Neo Keynesian Model From the Short Run to the Long Run i How long does it take to get back to equilibrium ii What if we do nothing and are Neo Keynesian iii Opportunity cost of doing something c 15 1 linking the Short Run and the Long Run i Short run the period of time in which prices do not change or do not change very much ii Long run the period of time in which prices have fully adjusted to any economic change classical d 15 2 How wage and price changes move the economy naturally back to full employment i Aggregate demand ii Aggregate Supply 1 short run and long run 2 Takes a long time for people to agree to a wage cut takes some time to adjust iii How the economy returns from a boom 1 opposite of before 2 If economy is operating above full employment prices will rise shifting the SR aggregate supply curve upward 3 This will return output to its full employment level 4 Problems with using Stabilization Policy Neo Classical a Neo classical say its not gentler to use you re paying for it in the LR with lower output lower real wages taxes burdens on the next generation 5 Problems with using Stabilization Policy Neo Keynesian a Neo keynesian worried about the times it takes



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