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In essence New-Keynesians adapt micro to macro theory. This is in contrast to new classicals which adapt macro theory to orthodox neoclassical market-clearing microfoundations. New-Keynesians adapt the rational expectations hypothesis but accept that market may fails due to wage and price stickiness and Friedman's natural rate hypothesis. The New-Keynesians, ...


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Wage-goods are goods that a worker with wages might buy, perhaps now more commonly called consumption goods Non-wage-goods are goods that a rentier receiving profits or interest might buy, including what might now be called capital goods or investment goods As to how to read Keynes's interpretation of Pigou's position (so actually neither Keynes's nor ...


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(Old) Keynesian Theory is what you might get taught in undergrad. It comes from behavioral rules and features the good old IS-LM etc diagrams. It rises the Keynesian traps, situations, where the economy might be stuck in downturns of the business cycle for a long time. These situations give rise to, for example, fiscal policy. Then came the Rational ...


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The investment ($I$) equals savings ($S$) result is derived by Keynes just from national identity, as a result it just hold by definition. Keynes in the passage starts with the simplified version of national identity that omits government. That is: $$Y=C+I \implies I=Y-C$$ And simply solves it for investment. The solution of investment tells us that private ...


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According to Keynes, the first fundamental postulate of the classical theory of employment I. The wage is equal to the marginal product of labour or $$ W(N) = P \cdot \frac{dQ}{dN}(N) $$ where $W(N)$ is a money wage, $N$ is an employment level, $Q(N)$ is a physical productivity of labour at that employment level and $P$ is a price of goods or as we call ...


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The economics and public policy website, Crooked Timber, devoted a question entirely to that subject recently. New Old Keynesianism delineates the differences between Old Old Keynesianism, Old New Keynesianism, New Old Keynesianism and New New Keynesianism such that "New" means “post Global Financial Crisis” and “Old” to refers to a belief that the ...


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Why is this a better economic model than uncertainty and economic agents thus having to make 'best guesses', with the result of 'animal spirits' playing a large role? Your question is ill-posed, but I will try and answer what I think you are struggling with. Let us go very simple to coin tosses. We are going to simplify it even further in that our coin ...


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One can distinguish between probabilistic randomness (which can be quantified) and uncertainty. This article by a Fed Researcher discusses this: “The Stock Market: Beyond Risk Lies Uncertainty” (Frank Schmid). As the tag to the question suggests, this is associated with Keynes, and post-Keynesian economics at present. Therefore, if you look at the post-...


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The distinction is between "nominal" and "real" recessions and booms. Real business cycle theory was developed to point out the fact that variations in employment and hours could occur even in an economy where markets were working competitively and there were no pricing frictions. In the RBC world, recessions and booms are driven by "real" factors: ...


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This sentence says something very simple: If labor supply is a function of many arguments, not just the wage, $L^s = f(w,X,Y,...)$, then the supply curve, which is a line in a two-dimensional space of $(L^s,w)$ keeping everything else constant, will shift as a whole("bodily") if these $X's$ and $Y's$ change. What could these "$X$'s and $Y$'s" be? First, if ...


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