ECON 460 Lecture Notes - Lecture 9: Premia, Mercantilism, Underconsumption
20 Sep 2013
School
Department
Course
Professor
Document Summary
Have to go from effective demand to employment. Determine output to see what employment gives you. If you increase demand for output then you increase demand for labor. Micro price determination vs. q theory price determination. General price level, like individual, depends partly on remuneration of factors and partly on scale of output. Scale of output affects price through productivity. At less than full employment, output responds to rises in m; at full employment, prices. L shapes relationship between output and prices. Exact effect depends on speed of growth: succession of points at which wages will rise even before full employment. Semi- inflation: marginal user cost may fluctuate differently and more widely than wages. True inflation: no further increase in employment, only prices rise. Asymmetry in the effect of changes in effective demand on output. Results from resistance to reductions in w. if not, there would be pure deflation, too.
