The Keynesian Model课件.pptVIP

The Keynesian Model the possibility of macroeconomic equilibrium with unemployment Great Depression From 1929-1941, the United States (and the world) was in a huge economic depression, in the U.S. the official unemployment rate was 25%. This doesn’t count the millions living in the “Hoovervilles” the homeless camps named for the President. Not until the U.S. entered WWII did the economy recover. Questioning Neoclassical Theory Economists and others began to ask the question: why isn’t the economy recovering, where is the self-adjusting mechanism. Neoclassical theory says the economy will recover in the long run, but how long is that? One famous economist, Joseph Schumpeter said: “The short run is long enough to bring about the ruin if a nation. John Maynard Keynes Another famous economist from Cambridge University in England, he remarked: “In the long run we’re all dead.” Keynes, writing in the midst of the Great Depression, criticized neoclassical theory, and put forward an alternative way of looking at the macroeconomy. Keynes on consumption and income Keynes began with a very simple proposition: when income goes up, consumption increases, but not by as much as income. So: 0 ΔC/ΔYd 1 Keynes on income and savings If that is true, then it must also be true (since Yd = C + S) that when income goes up, savings increases, but not by as much: 0 ΔS/ΔYd 1 the mpc and the mps ΔC/ΔYd is called the mpc (marginal propensity to consume) ΔS/ΔYd is called the mps (marginal propensity to save) ΔC/ΔYd + ΔS/ΔYd = 1 and mps = 1 – b ΔC/ΔYd + ΔS/ΔYd = 1 and mps = 1 – b Proof: ΔC/ΔYd + ΔS/ΔYd = 1 and mps = 1 – b Proof: If Yd = C + S, then ΔC/ΔYd + ΔS/ΔYd = 1 and mps = 1 – b Proof: If Yd = C + S, then Any change in Yd must resolve itself some part of a change in C and some part a change in S. ΔC/ΔYd + ΔS/ΔYd = 1 and mps = 1 – b Proof: If Yd = C + S, then Any change in Yd must resolve itself some part of a change in C and some part a change in S. So, ΔYd = Δ