Download PDF by Frederick van Der Ploeg: Advanced Lectures in Quantitative Economics

By Frederick van Der Ploeg

ISBN-10: 0127117032

ISBN-13: 9780127117034

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It may therefore be written as: u=U[v(cn,ct),m]. 23 Finally, how is income determined? The answer depends of course on the regime in which the economy is 22 It may be mentioned in passing that the assumption of a single non-traded good is far from innocuous and can be justified only on the basis of convenience. 23 This constraint may be rewritten in a form which points to the compatibility between our approach and many presentations of the monetary approach to the balance of payments. 11) becomes: C - Y-H.

For example, since the economy must always lie along the NN or NN' loci in Figure 9, a wage cut will always induce a tightening of the labour market. It may also be checked that increases in government purchases of traded goods lead, as before, to an exactly equal deterioration of the trade balance, without affecting the level of economic activity. Neo-Keynesian Macroeconomics in an Open Economy 33 A new feature of this model is that fiscal policy may take the form of government purchases of the non-traded good, and these will have real effects on the domestic level of activity.

As for region K, unemployment here depends on Neo-Keynesian Macroeconomics in an Open Economy 41 demand and so is negatively related to p, but it is independent of w. Isoemployment loci are therefore vertical straight lines, corresponding to higher levels of unemployment the further they are from A. Finally, within the R region, the level of employment is fixed although the levels of incipient excess demand (as measured by the difference between notional demand and supply for goods and labour) are greater the lower are w and/7.

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Advanced Lectures in Quantitative Economics by Frederick van Der Ploeg

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