ECN 301 Chapter Notes - Chapter 8: Real Interest Rate, Nominal Rigidity, Autonomous Consumption

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5 Apr 2011
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Real gdp in canadian history: the flexible-price model does not give a complete picture of the macroeconomy. Real gdp does not always grow by the same rate as potential output. The unemployment rate is not always at the natural rate. Business cycles: fluctuations in economic growth are called business cycles, a business cycle has two phases. Expansion or boom: production, employment, and prices all grow rapidly. They will remain fixed at predetermined levels as businesses expand or contract production. We then say, output is demand determined: hence, in studying the mechanics of the sticky price model we start with a detailed study of the components of aggregate expenditures. Consumption, investment, government expenditures and net exports. Fixed price models www. notesolution. com: to contrast the difference between the flexible price model and the fixed price model consider the effects of a fall in autonomous consumption (c0).

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