Chapter10AggregateDemandIBuildingtheIS-LMModel(曼昆宏观经济学第七版(英.pptVIP

Increasing GovernmentPurchases to Stimulate theEconomy: The Obama Spending Plan * Chapter Ten * CHAPTER 10 Aggregate Demand 1: Building the IS-LM Model ? A PowerPoint?Tutorial To Accompany MACROECONOMICS, 7th. Edition N. Gregory Mankiw Tutorial written by: Mannig J. Simidian B.A. in Economics with Distinction, Duke University M.P.A., Harvard University Kennedy School of Government M.B.A., Massachusetts Institute of Technology (MIT) Sloan School of Management The Great Depression caused many economists to question the validity of classical economic theory (from Chapters 3-6). They believed they needed a new model to explain such a pervasive economic downturn and to suggest that government policies might ease some of the economic hardship that society was experiencing. In 1936, John Maynard Keynes wrote The General Theory of Employment, Interest, and Money. In it, he proposed a new way to analyze the economy, which he presented as an alternative to the classical theory. Keynes proposed that low aggregate demand is responsible for the low income and high unemployment that characterize economic downturns. He criticized the notion that aggregate supply alone determines national income. In 2008 and 2009, as the United States and Europe descended into a recession, the Keynesian theory of the business cycle was often in the news. Policymakers around the world debated how best to increase aggregate demand with both monetary and fiscal policy. “Keynesian” means different things to different people. It’s useful to think of the basic textbook Keynesian model as an elaboration and extension of the “classical theory.” Its variable velocity of money and “sticky” prices reflects Keynes’s belief that the Classical model’s shortcomings arose from its overly-strict assumptions of constant velocity and highly flexible wages and prices. The model of aggregate demand (AD) can be split into two parts: IS model of the “goods market” and the LM model of the “money market