Output, Inflation, and Stabilization
Output, Inflation, and Stabilization
This chapter describes a number of historical models, particularly the most traditional Keynesian models, such as the Keynesian cross, the IS-LM model, and the AD-AS model. These models are primarily static and based on temporary price and wage rigidities. The chapter then examines the Phillips curve, which describes the evolution of wages in response to unemployment. It discusses how the interaction of the Phillips curve and the evolution of expectations determines the joint dynamics of inflation and unemployment. It also illustrates the eminent debate on stabilization in the Keynesian mode.
Keywords: Keynesian models, Keynesian cross, IS-LM model, AD-AS model, Phillips curve, unemployment, inflation
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