ECO209Y5 Study Guide - Midterm Guide: New Keynesian Economics, Real Business-Cycle Theory, Macroeconomic Model
Document Summary
What is macroeconomics: macroeconomics is the study of the behaviour of large collections of economic agents. Keynesian and non-keynesian: traditional old keynesian models are based on the notion that wages and prices are sticky in the short run, and do not change sufficiently quickly to yield efficient outcomes. If consumers anticipate that their future incomes will be high, they will want to save less in the present and consume more, and this will have important implications for current aggregate production, employment, and interest rates. It is quite unstable and does not represent a long-run tradeoff between output and inflation that can be exploited by government policymakers. Unemployment: unemployment is in general a socially useful search activity that is necessary, though perhaps painful to the individuals involved. Consumer and firm behaviour: the work-leisure decision and profit. In chapter 2 focused on how we measure variables of macroeconomic interest, will now turn to the construction and analysis of a particular macroeconomic model.
