Review of the previous lecture 1. Real Business Cycle theory. § assumes perfect flexibility of wages and prices. § shows how fluctuations arise in response to productivity shocks. § the fluctuations are optimal given the shocks .2. Points of controversy in RBC theory. § intertemporal substitution of labor. § the importance of technology shocks. § the neutrality of money. § the flexibility of prices and wages Review of the previous lecture 3. New Keynesian economics. § accepts the traditional model of aggregate demand and supply § attempts to explain the stickiness of wages and prices with. microeconomic analysis, including. § menu costs. § coordination failure. § staggering of wages and prices Lecture 21 Consumption-I .Instructor: Prof. Dr. Qaisar Abbas Lecture contents .• John Maynard Keynes: consumption and current income .• Irving Fisher and Intertemporal Choice Keynes’s Conjectures 1. 0 0. § save more. MPC |
