Keynesian theory/Tutorials: Difference between revisions
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| Line 23: | Line 23: | ||
The production function | The production function | ||
::::::y = y(n) | ::::::y = y(n) ---------------------------------- (3) | ||
The labour market | The labour market | ||
::::::dy/dn = W/P | ::::::dy/dn = W/P ----------------------------- (4) | ||
Investment | Investment | ||
::::::i = i(r) | ::::::i = i(r) ------------------------------------- (5) | ||
Savings | Savings | ||
::::::s = i | ::::::s = i ---------------------------------------- (6) | ||
Sticky wages | Sticky wages | ||
::::::W =W<sub>o,<sub> | ::::::W =W<sub>o,</sub> ------------------------------------ (7) | ||
Revision as of 05:17, 21 November 2009
The Keynesian model
Let:-
y = the national income
n = the numbers employed
W = the money wage
P = the price level
M = the money supply
l = the income elasticity of demand for money
L = the interest elasticity of demand for money
then:-
The demand for money
- M = lPy + L(r) ------------------------ (1)
The consumption function
- s = s(y) -------------------------------- (2)
The production function
- y = y(n) ---------------------------------- (3)
The labour market
- dy/dn = W/P ----------------------------- (4)
Investment
- i = i(r) ------------------------------------- (5)
Savings
- s = i ---------------------------------------- (6)
Sticky wages
- W =Wo, ------------------------------------ (7)