Model(宏观经济学-加州大学-詹姆斯·布拉德福特·德.ppt

CHAPTER 6
Building Blocks of the Flexible-Price Model
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Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Questions
What is a full-employment analysis?
What keeps the economy at full employment when wages and prices are flexible?
What determines the level of consumption spending?
What determines the level of investment spending?
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Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Questions
What determines the level of net exports?
What determines the level of the exchange rate?
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Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Full-Employment Analysis
We will now look at the economy over the short-run
a period in which its productive resources are fixed
We will assume that wages and prices are flexible so that all markets clear
supply equals demand in the labor market
full-employment analysis
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Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Flexible-Price Model
Two sets of factors determine the levels of potential output and real wages
the production function
the balance of supply and demand in the labor market
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Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
The Production Function
Potential output (Y*) is determined by
the size of the labor force (L)
the economy’s capital stock (K)
the efficiency of labor (E)
a parameter indicating how quickly returns to investment diminish ()
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Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Figure - The Production Function
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Copyright © 2002 by The McGraw-Hill Companies, Inc. All rights reserved.
Flexible-Price Model
The assumption that wages and prices are flexible was commonly made by “classical” economists
Thus, this assumption is often called the classical assumption
guarantees that markets work
guarantees full employment
guarantees that actual output is equal to potential output
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Copyright © 2002 by The McGraw-Hill Compani