III. UNIT III

1. III. UNIT III A. The Inflation-Unemployment Relationship 1. Graphical presentation of AD and AS...New Classical 2. Graphical presentation of AD and AS...Modern Keynesian 3. Reconciliation of the difference between these viewpoints and what this reconciliation reveals about the debates over stabilization policy

2. LRAS CLASSICAL/NEW CLASSICAL PRICE LEVEL AD F.E. REAL GDP GDP LONG RUN

3. KEYNESIAN/MODERN KEYNESIAN SRAS PRICE LEVEL AD REAL GDP SHORT RUN

4. A PERIOD OF TIME LONG ENOUGH FOR INPUT PRICES TO FULLY ADJUST TO NEW ECONOMIC REALITIES. LONG RUN

5. LRAS CLASSICAL/NEW CLASSICAL PRICE LEVEL AD F.E. REAL GDP GDP

6. A PERIOD OF TIME TOO SHORT FOR INPUT PRICES TO FULLY ADJUST TO NEW ECONOMIC REALITIES. SHORT RUN

7. KEYNESIAN/MODERN KEYNESIAN SRAS PRICE LEVEL AD REAL GDP

8. KEYNESIAN/MODERN KEYNESIAN CLASSICAL/NEW CLASSICAL SRAS LRAS PRICE PRICE LEVEL LEVEL AD AD REAL F.E. REAL GDP GDP GDP SHORT RUN LONG RUN

9. KEYNESIAN/MODERN KEYNESIAN CLASSICAL/NEW CLASSICAL SRAS LRAS PRICE PRICE LEVEL LEVEL AD AD REAL F.E. REAL SUPPOSE F.E. GDP GDP GDP GDP HAPPENS TO BE HERE SHORT RUN LONG RUN

10. KEYNESIAN/MODERN KEYNESIAN CLASSICAL/NEW CLASSICAL SRAS LRAS PRICE PRICE LEVEL LEVEL AD AD REAL F.E. REAL GDP GDP SUPPOSE F.E. GDP GDP HAPPENS TO BE HERE LONG RUN SHORT RUN

11. KEYNESIAN/MODERN KEYNESIAN CLASSICAL/NEW CLASSICAL SRAS LRAS PRICE PRICE LEVEL LEVEL AD AD REAL F.E. REAL GDP GDP SUPPOSE F.E. GDP GDP HAPPENS TO BE HERE LONG RUN SHORT RUN

12. KEYNESIAN/MODERN KEYNESIAN CLASSICAL/NEW CLASSICAL SRAS LRAS PRICE PRICE LEVEL LEVEL AFTER LONG RUN ADJUSTMENT AD AD REAL F.E. REAL GDP GDP SUPPOSE F.E. GDP GDP HAPPENS TO BE HERE LONG RUN SHORT RUN

13. KEYNESIAN/MODERN KEYNESIAN CLASSICAL/NEW CLASSICAL SRAS LRAS PRICE PRICE LEVEL LEVEL AFTER LONG RUN ADJUSTMENT AD AD REAL F.E. REAL GDP GDP SUPPOSE F.E. GDP GDP HAPPENS TO BE HERE LONG RUN SHORT RUN

14. KEYNESIAN/MODERN KEYNESIAN CLASSICAL/NEW CLASSICAL SRAS LRAS PRICE PRICE LEVEL LEVEL AD AD REAL F.E. REAL GDP GDP SUPPOSE F.E. GDP GDP HAPPENS TO BE HERE LONG RUN SHORT RUN

15. KEYNESIAN/MODERN KEYNESIAN CLASSICAL/NEW CLASSICAL SRAS LRAS PRICE PRICE LEVEL LEVEL AD AD REAL F.E. REAL GDP GDP SUPPOSE F.E. GDP GDP HAPPENS TO BE HERE LONG RUN SHORT RUN

16. KEYNESIAN/MODERN KEYNESIAN CLASSICAL/NEW CLASSICAL SRAS LRAS PRICE PRICE LEVEL LEVEL AFTER LONG RUN ADJUSTMENT AD AD REAL F.E. REAL GDP GDP SUPPOSE F.E. GDP GDP HAPPENS TO BE HERE LONG RUN SHORT RUN

17. KEYNESIAN/MODERN KEYNESIAN CLASSICAL/NEW CLASSICAL SRAS LRAS PRICE PRICE LEVEL LEVEL AFTER LONG RUN ADJUSTMENT AD AD REAL F.E. REAL GDP GDP SUPPOSE F.E. GDP GDP HAPPENS TO BE HERE LONG RUN SHORT RUN

18. KEYNESIAN/MODERN KEYNESIAN CLASSICAL/NEW CLASSICAL SRAS LRAS PRICE PRICE LEVEL LEVEL AD AD REAL F.E. REAL GDP GDP SUPPOSE F.E. GDP GDP HAPPENS TO BE HERE LONG RUN SHORT RUN

19. KEYNESIAN/MODERN KEYNESIAN CLASSICAL/NEW CLASSICAL SRAS LRAS PRICE PRICE LEVEL LEVEL LR AS AD AD REAL F.E. REAL GDP GDP SUPPOSE F.E. GDP GDP HAPPENS TO BE HERE LONG RUN SHORT RUN

20. KEYNESIAN/MODERN KEYNESIAN CLASSICAL/NEW CLASSICAL SRAS LRAS PRICE PRICE LEVEL LEVEL AD AD REAL F.E. REAL GDP GDP SUPPOSE F.E. GDP GDP HAPPENS TO BE HERE LONG RUN SHORT RUN

21. KEYNESIAN/MODERN KEYNESIAN CLASSICAL/NEW CLASSICAL SRAS LRAS PRICE PRICE LEVEL LEVEL AD AD REAL F.E. REAL GDP GDP SUPPOSE F.E. GDP GDP HAPPENS TO BE HERE LONG RUN SHORT RUN

22. KEYNESIAN/MODERN KEYNESIAN CLASSICAL/NEW CLASSICAL SRAS LRAS PRICE PRICE LEVEL LEVEL SHOULD GOV. FIX AD ? AD AD REAL F.E. REAL GDP GDP SUPPOSE F.E. GDP GDP HAPPENS TO BE HERE LONG RUN SHORT RUN

23. KEYNESIAN/MODERN KEYNESIAN CLASSICAL/NEW CLASSICAL SRAS LRAS PRICE PRICE LEVEL LEVEL LIKE THIS! AD AD REAL F.E. REAL GDP GDP SUPPOSE F.E. GDP GDP HAPPENS TO BE HERE SHORT RUN LONG RUN

24. KEYNESIAN/MODERN KEYNESIAN CLASSICAL/NEW CLASSICAL SRAS LRAS PRICE PRICE LEVEL LEVEL OR WAIT FOR THIS TO HAPPEN? AD AD REAL F.E. REAL GDP GDP SUPPOSE F.E. GDP GDP HAPPENS TO BE HERE SHORT RUN LONG RUN

25. KEYNESIAN/MODERN KEYNESIAN CLASSICAL/NEW CLASSICAL SRAS LRAS PRICE PRICE LEVEL LEVEL AFTER LONG RUN ADJUSTMENT AD AD REAL F.E. REAL GDP GDP SUPPOSE F.E. GDP GDP HAPPENS TO BE HERE SHORT RUN LONG RUN

26. KEYNESIAN/MODERN KEYNESIAN CLASSICAL/NEW CLASSICAL SRAS IF YOU BELIEVE THAT AS PRICE PRICE LEVEL POLICY SHOULD BE LEVEL GUIDED BY THIS VIEWPOINT (SHORT RUN MOST IMPORTANT) AD GOVERNMENT SHOULD AD FIX AGGREGATE REAL F.E. DEMAND REAL GDP GDP SUPPOSE F.E. GDP GDP HAPPENS TO BE HERE SHORT RUN LONG RUN

27. KEYNESIAN/MODERN KEYNESIAN CLASSICAL/NEW CLASSICAL SRAS IF YOU BELIEVE THAT AS PRICE PRICE LEVEL POLICY SHOULD BE LEVEL GUIDED BY THIS VIEWPOINT (SHORT RUN MOST IMPORTANT) AD GOVERNMENT SHOULD AD FIX AGGREGATE REAL F.E. DEMAND REAL GDP GDP SUPPOSE F.E. GDP GDP HAPPENS TO BE YOU FAVOR HERE DEMAND-SIDE LONG RUN SHORT RUN STABILIZATION!!!

28. KEYNESIAN/MODERN KEYNESIAN CLASSICAL/NEW CLASSICAL AS IF YOU BELIEVE POLICY LRAS PRICE PRICE SHOULD BE GUIDED BY LEVEL LEVEL THIS VIEWPOINT (LONG RUN MOST IMPORTANT) GOVERNMENT SHOULD WAIT FOR AUTOMATIC ADJUSTMENT OF AD AD A. SUPPLY REAL F.E. REAL GDP GDP SUPPOSE F.E. GDP GDP HAPPENS TO BE HERE SHORT RUN LONG RUN

29. KEYNESIAN/MODERN KEYNESIAN CLASSICAL/NEW CLASSICAL AS IF YOU BELIEVE POLICY LRAS PRICE SHOULD BE GUIDED BY PRICE LEVEL LEVEL THIS VIEWPOINT (LONG RUN MOST IMPORTANT) GOVERNMENT SHOULD WAIT FOR AUTOMATIC ADJUSTMENT OF AD AD A. SUPPLY REAL F.E. REAL GDP GDP SUPPOSE F.E. GDP YOU ARE OPPOSED GDP HAPPENS TO BE TO DEMAND-SIDE HERE SHORT RUN STABILIZATION!!!!!!!!! LONG RUN

30. KEYNESIAN/MODERN KEYNESIAN SRAS PRICE LEVEL EQ. P.LEVEL AD SUPPOSE AS LUCK WOULD REAL EQ. HAVE IT--F.E.GDP GDP GDP

32. KEYNESIAN/MODERN KEYNESIAN SRAS PRICE LEVEL REAL WAGES UP EQ. P.LEVEL AD SUPPOSE AS LUCK WOULD EQ. REAL HAVE IT--F.E.GDP GDP GDP

33. SRAS PRICE LEVEL REAL WAGES BACK DOWN EQ. P.LEVEL AD SUPPOSE AS LUCK WOULD REAL EQ. HAVE IT--F.E.GDP GDP GDP

34. KEYNESIAN/MODERN KEYNESIAN SRAS PRICE LEVEL EQ. P.LEVEL AD SUPPOSE AS LUCK WOULD REAL EQ. HAVE IT--F.E.GDP GDP GDP

36. KEYNESIAN/MODERN KEYNESIAN SRAS PRICE REAL LEVEL WAGE DOWN EQ. P.LEVEL AD SUPPOSE AS LUCK WOULD REAL EQ. HAVE IT--F.E.GDP GDP GDP

37. SRAS KEYNESIAN/MODERN KEYNESIAN PRICE REAL LEVEL WAGE EQ. BACK P.LEVEL UP AD REAL EQ. SUPPOSE AS LUCK WOULD HAVE IT--F.E.GDP GDP GDP

38. Wage stickiness? SRAS PRICE LEVEL EQ. P.LEVEL AD REAL EQ. SUPPOSE AS LUCK WOULD HAVE IT--F.E.GDP GDP GDP

39. Wage stickiness? KEYNESIAN/MODERN KEYNESIAN SRAS PRICE LEVEL REAL WAGES UP EQ. P.LEVEL AD EQ. REAL SUPPOSE AS LUCK WOULD HAVE IT--F.E.GDP GDP GDP

40. Wage stickiness? SRAS PRICE LEVEL REAL WAGES BACK DOWN EQ. P.LEVEL AD REAL EQ. SUPPOSE AS LUCK WOULD HAVE IT--F.E.GDP GDP GDP

41. SRAS RATE PRICE UNION OF INFLATION LEVEL CONTRACTS REQUIRE 7% PAY RAISES PER YEAR 7% AD REAL EQ. SUPPOSE AS LUCK WOULD HAVE IT--F.E.GDP GDP GDP

42. KEYNESIAN/MODERN KEYNESIAN SRAS RATE PRICE OF LEVEL INFLATION REAL WAGES UP 4% AD EQ. REAL SUPPOSE AS LUCK WOULD HAVE IT--F.E.GDP GDP GDP

43. UNIONS SRAS NEGOTIATE RATE PRICE NEW CONTRACTS OF LEVEL INFLATION WITH RAISES WELL UNDER 4% REAL WAGES BACK DOWN 2% AD REAL EQ. SUPPOSE AS LUCK WOULD HAVE IT--F.E.GDP GDP GDP

44. KEYNESIAN/MODERN KEYNESIAN SRAS PRICE LEVEL EQ. P.LEVEL AD REAL EQ. SUPPOSE AS LUCK WOULD HAVE IT--F.E.GDP GDP GDP

45. KEYNESIAN/MODERN KEYNESIAN SRAS PRICE LEVEL EQ. P.LEVEL AD EQ. REAL SUPPOSE AS LUCK WOULD HAVE IT--F.E.GDP GDP GDP

46. KEYNESIAN/MODERN KEYNESIAN SRAS PRICE LEVEL EQ. P.LEVEL AD REAL EQ. SUPPOSE AS LUCK WOULD HAVE IT--F.E.GDP GDP GDP

47. long run This is a misleading guide to current affairs.

48. long run is a misleading This guide to current affairs. In the long run we are all dead.

49. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again.

50. ADAPTIVE EXPECTATIONS PRICE LEVEL SRAS AD F.E. REAL GDP