Macro9TheAnalysisofPriceDetermination宏观经济学(南开大学,龚刚).pptVIP

Macroeconomics Lecture 9 The Analysis of Price Determination I. Introduction The objective is to discuss how price and wage are determined in Keynesian analysis. The medium run versus short run In the short run, price is assumed to be fixed. In the medium run, price is assumed to be adjustable. II. Principles in Price Determination Market Condition (excess demand or excess supply) This is more emphasized in microeconomics and in Neo and New classical analysis. Generally speaking, Keynesian economics does not exclude the market condition (excess demand or supply) as a factor to determine price. In macroeconomics, the inflation caused by market condition is often named as demand-pull inflation. II. Principles in Price Determination Cost condition In addition to demand-supply condition, the cost of production is also an important factor in price determination. This seems to be more emphasized in Keynesian economics. In macroeconomics, the inflation caused by cost is often named as cost-push inflation. II. Principles in Price Determination The Rule of Expectation There is no doubt that expectation is also an important factor in determining price. This is particularly emphasized by Milton Friedman. How does expectation influence the price? How is expectation formed? II. Principles in Price Determination Staggered Price Adjustment Although price may response to market condition, it does not means that the price will clear the market in each period. This is because price adjustment is somewhat staggered. There are some micro-model for this staggered price adjustment in New Keynesian literature, which we shall discuss later in this lecture. III. Wage Determination In reality, wage may be set by many ways: Collective bargaining between firms and unions; The government may set up a minimum wage rate; Firms may simply decide a wage rate according to the market condition; Or a firm may even pay an efficiency wage (the wage level beyond the market conditio