ECON 3P04 Lecture Notes - Lecture 7: Monetarism, New Keynesian Economics, Monetary Policy
Document Summary
As ad goes down, consumption more consumed In as, wage is constant and slopes upwards because in sr the capitalist looks at profit per unit. If wage/capital changes, you have a shift in as. Ad: we know that it comes out of keynesian economics. To make it a political statement, you add a lras in the graph (letting you know that prices and wages are flexible) Why are markets crashing?- people are irrational. Monetarists assume you go to lr quickly and have complete crowding out/ neutral. Monetary policy is affected in the lr. In germany, there"s chaos, because after losing the war, france had heavy penalty for. Keynes sees this and decides that it should be fixed. By early 50s, world has changed dramatically. In the west, using keynes economics in a steady way until 70s. Everytime its used, you"re getting inflation that are 19-22 %, which doesn"t look good.