assignment.macro (autosaved)

8/10/2019 Assignment.macro (Autosaved)

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T(e Cl' ic'l c(""l, w(ic( i #e*'#ded ' !(e %i# ! c(""l "% ec"&"+ic !("u*(!, i' "ci'!ed wi!( !(e 1 !( Ce&!u#$ Sc"!!i ( ec"&"+i ! Ad'+ S+i!(, '&d !(" e B#i!i (ec"&"+i ! !('! %"ll"wed, uc( ' R")e#! M'l!(u '&d D' id Ric'#d".

KE/NESIAN SCHOO

B#i!i ( ec"&"+i ! "(& M'$&'#d Ke$&e )elie ed !('! cl' ic'l ec"&"+ic !(e"#$ did&"! p#" ide ' w'$ !" e&d Dep#e i"& . He '#*ued !('! u&ce#!'i&!$ c'u ed i&di idu'l'&d )u i&e e !" !"p pe&di&* '&d i& e !i&*, '&d *" e#&+e&! +u ! !ep i& '&dpe&d +"&e$ !" *e! !(e ec"&"+$ )'ck "& !#'ck. Hi ide' led !" ' #e "lu!i"& i&ec"&"+ic !("u*(!.

NE C ASSICA SCHOO

New cl' ic'l +'c#"-ec"&"+ic d'!e %#"+ !(e 13 0 , '&d i '& '!!e+p! !" e5pl'i&+'c#"-ec"&"+ic p#")le+ '&d i ue u i&* +ic#"-ec"&"+ic c"&cep! like #'!i"&'l

)e(' i"#, '&d #'!i"&'l e5pec!'!i"& . New cl' ic'l ec"&"+ic i ' "ci'!ed wi!( !(ew"#k "% C(ic'*" ec"&"+i !, R")e#! uc' .

NE KE/NESIAN SCHOO

Ke$&e i'& ec"&"+i ! )#"'dl$ %"ll"w !(e +'i& +'c#"-ec"&"+ic ide' "% B#i!i (ec"&"+i ! "(& M'$&'#d Ke$&e . Ke$&e i widel$ #e*'#ded ' !(e +" ! i+p"#!'&!ec"&"+i ! "% !(e 20!( Ce&!u#$, de pi!e %'lli&* "u! "% %' "# du#i&* !(e 13 0 '&d13 0 %"ll"wi&* !(e #i e "% &ew cl' ic'l ec"&"+ic . I& e e&ce, Ke$&e i'&

ec"&"+i ! '#e kep!ic'l !('!, i% le%! 'l"&e, %#ee +'#ke! will i&e i!')l$ +" e !"w'#d%ull e+pl"$+e&! e6uili)#iu+.


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KE/ ORDS

O7EC8 OR9ANISATION O: 7ETRO EUM E;7ORTIN9

COUNTRIES.

9D78 9ROSS DOMESTIC 7RODUCT.

MEBCT8 MONETAR/ E


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NE C ASSICA SCHOO O: THOU9HT

INTRODUCTION

I& 13 0, OR9ANI>ATION O: 7ETRO EUM E;7ORTIN9 COUNTRIES ?O7EC@i&c#e' ed !(e "il p#ice %"u#-%"ld %"ll"wi&* A#')-I #'el w'# '&d STA9: ATION i&C'pi!'li ! C"u&!#ie . T(e New Cl' ic'l Sc(""l "% T("u*(! e+e#*ed ' ' di !i&c!i e*#"up !" e5pl'i& STA9: ATION )ec'u e Ke$&e i'& Ec"&"+ic ('d %'iled !(e&, "& !(e

)' i , "% !(e"#e!ic'l '&d e+pi#ic'l %l'w . New Cl' ic'l M'c#"ec"&"+i ! w'&!ed !" p#" ide &e"-cl' ic'l +ic#"ec"&"+ic%"u&d'!i"& %"# +'c#"ec"&"+ic '&'l$ i . uc' w' i&i!i'!ed i& M'c#"ec"&"+ic '&'l$ i'&d c"&!#i)u!ed )$ B'##" ?13 ,13 1@, Se#*e&! '&d 'll'ce ?13 @.

DE=E O7MENT O: NE C ASSICA MACROECONOMISTS

O& !(e !(e"#e!ic'l le el, New Cl' ic'l +'c#"ec"&"+i ! '#*ue !('! !#'di!i"&'l +"del(' e ' u+ed !('! e5pec!'!i"& '#e %"#+ed i& &'i e w'$ . N'i e e5pec!'!i"& '#ei&c"& i !e&! wi!( !(e ' u+p!i"& "% +'c#"ec"&"+ic . I% pe"ple '#e "u! !" +'5i+i eu!ili!$ '&d p#"%i!, !(e$ ("uld %"#+ !(ei# e5pec!'!i"& i& ' +'#!e# w'$.

RATIONA E;7ECTATIONS

I% %i#+ (' e #'!i"&'l e5pec!'!i"& '&d i% !(e$ e! p#ice '&d w'*e , "& !(i )' i , !(e& "&' e#'*e, p#ice '&d w'*e will )e e! '! le el !('! e& u#e e6uili)#iu+ i& !(e p#"duc! '&dl')"# +'#ke!.

RE ATI=E 7RICES MATTER :OR O7TIMI>IN9 DECISION

T(e +'i& %e'!u#e "% New Cl' ic'l +"del i !('! ec"&"+ic '*e&! d" &"! u%%e# %#"++"&e$ illu i"& '&d !(e#e%"#e, "&l$ #el'!i e p#ice +'!!e# %"# "p!i+i i&* deci i"& .'*e '&d p#ice %le5i)ili!$ e& u#e !('! +'#ke! c"&!i&u"u l$ cle'# ' '*e&! e5('u ! 'll+u!u'll$ )e&e%ici'l *'i& %#"+ !#'de, le' i&* &" e5pl"i!ed p#"%i!')le "pp"#!u&i!ie . He&cec('&*e i& !(e 6u'&!i!$ "% +"&e$ ("uld )e &eu!#'l '&d #e'l +'*&i!ude will )ei&depe&de&! "% &"+i&'l +'*&i!ude . /e! e+pi#ic'l e ide&ce ("w !('! !(e#e i '! le' ! '("#! #u& p" i!i e c"##el'!i"& )e!wee& #e'l 9D7 '&d &"+i&'l p#ice le el '&d &e*'!i ec"##el'!i"& )e!wee& i&%l'!i"& '&d u&e+pl"$+e&!?7(illip Cu# [email protected](i di c#ep'&c$ %#"+!(e e+pi#ic'l e ide&ce '&d !(e"#$ "& !(e &eu!#'li!$ "% +"&e$ w' e5pl'i&ed )$ uc' i&E5pec!'!i"& '&d Neu!#'li!$ "% +"&e$ i& 13 2.


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Be$"&d d"u)!, !(e#e i ' #el'!i"& (ip "% c"&!i&ui!$ )e!wee& #e'l )u i&e c$cle +"del'&d uc' w"#k. T(e$ '#e )' ed "& !(e '+e c"&cep!u'l i&*#edie&! F ' pe#%ec!l$c"+pe!i!i e ec"&"+$, !(e e6uili)#iu+ di cipli&e, #'!i"&'l e5pec!'!i"& , ' !"c(' !icd$&'+ic e& i#"&+e&!, '&d i&!e#-!e+p"#'l u) !i!u!i"&. T(e !(#ee +'i& dep'#!u#e

K$dl'&d '&d 7#e c"!! ?13 2@ +'de %#"+ uc' 'pp#"'c( we#eF ')'&d"&i&* (i iew "%' +"&e$-d#i e& c$cle, '& i+p"#!'&! +" e, w(ic( 'l " +e'&! ' dep'#!u#e %#"+ !(e:#ied+'&i'& i i"&8 #epl'ci&* i+pe#%ec! pe#%ec!i&%"#+'!i"&F e&*'*i&* i& 'pplied w"#k. T(i ec"&d c('&*e de e# e %u#!(e# '!!e&!i"&.Bu i&e c$cle p" e ' peci'l c('lle&*e %"# &ew cl' ic'l ec"&"+i ! . T(e ec"&"+$, !(e$

)elie e, i "%!e& )u%%e!ed )$ u&e5pec!ed ("ck . S("ck !" '**#e*'!e de+'&d '#e!$pic'll$ u&'&!icip'!ed c('&*e i& +"&e!'#$ "# %i c'l p"lic$. S("ck !" '**#e*'!e uppl$'#e !$pic'll$ c('&*e i& p#"duc!i i!$ !('! +'$ #e ul!, %"# e5'+ple, %#"+ !#'& ie&! c('&*e!" !ec(&"l"*$, p#ice "% #'w +'!e#i'l , "# !(e "#*'&i '!i"& "% p#"duc!i"&. Ide'll$, %i#+w"uld c("" e !" p#"duce +"#e '&d !" p'$ !(ei# w"#ke# +"#e w(e& !(e ec"&"+$ ('

)ee& (i! )$ %' "#')le ("ck '&d le w(e& (i! )$ u&%' "#')le ("ck . Si+il'#l$, w"#ke#

w"uld )e willi&* !" w"#k +"#e w(e& p#"duc!i i!$ '&d w'*e #'!e '#e (i*(e# '&d !" !'ke+"#e lei u#e w(e& !(ei# #ew'#d '#e l"we#. :"# )"!(, !(e #ule i +'ke ('$ w(ile !(e u&(i&e .T(e %'c! !('! !(e ec"&"+$ e5pe#ie&ce *""d '&d )'d ("ck i &"! e&"u*( !" e5pl'i&

)u i&e c$cle . A& 'de6u'!e !(e"#$ +u ! 'cc"u&! %"# pe# i !e&ce, !(e %'c! !('! )u i&ec$cle !$pic'll$ di pl'$ l"&* #u+ *""d !i+e %"ll"wed )$ ("#!e#, )u! !ill i*&i%ic'&!,#u& "% )'d !i+e . T(" e &ew cl' ic'l w(" #e*'#d de+'&d ("ck ' d"+i&'&! '#*ue !('!!(e ("ck '#e p#"p'*'!ed l"wl$. I! i 'lw'$ c" !l$ !" 'd u ! p#"duc!i"& le el 6uickl$.Si+il'#l$, w(e& (i*(e# p#"duc!i"& #e6ui#e &ew c'pi!'l, i! !'ke !i+e !" )uild i! up. A&dw(e& l"we# p#"duc!i"& #e&de# e5i !i&* c'pi!'l #edu&d'&!, i! !'ke !i+e !" we'# i! "u! "#

u e i! up. New cl' ic'l "% !(e #e'l )u i&e c$cle c(""l ?led )$ Edw'#d 7#e c"!! '&d:i&& K$dl'&d, c"- #ecipie&! "% !(e 2004 N")el 7#i e@ #e*'#d !" c('&*e i& p#"duc!i i!$' d#i i&* %"#ce i& )u i&e c$cle . Bec'u e c('&*e i& !ec(&"l"*$ +'$ 'l " c"+e i&w' e , #u& "% %' "#')le "% u&%' "#')le p#"duc!i i!$?"# !ec(&"l"*$@ ("ck +'$ 'cc"u&!%"# "+e "% pe# i !e&ce c('#'c!e#i !ic "% )u i&e c$cle .

M'&kiw A&d !(#ee ' u+p!i"& "% RBC8

:i# !, #e'l )u i&e c$cle !(e"#$ ' u+e !('! !(e ec"&"+$ e5p#ie&ce l'#*e '&d udde&c('&*e i& !(e ' 'il')le p#"duc!i"& !ec(&"l"*$. M'&$ #e'l )u i&e c$cle +"del e5pl'iece i"& ' pe#i"d "% !ec(&"l"*ic'l ')ili!$. C#i!ic '#*ue !('! l'#*e c('&*e i&!ec(&"l"*$ #e*#e , '#e i+pl'u i)le ?Su++e# 13 J8 M'&kiw 13 3@. I! i +"#e c"++"&

p#e u+p!i"& !('! !ec(&"l"*ic'l p#"*#e "ccu# *#'du'll$.

Sec"&d, #e'l )u i&e c$cle !(e"#$ ' u+e !('! %luc!u'!i"& i& e+pl"$+e&! #e%lec!c('&*e i& !(e '+"u&!, pe"ple w'&! !" w"#k. T(i ' u+p!i"& c"&%lic! wi!( +'&$ec"&"+e!#ic !udie "% l')"# uppl$ u i&* d'!' "& i&di idu'l , w(ic( !$pic'll$ %i&d +'ll


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i& !e#!e+p#"'l el' !ici!$ "% u) !i!u!i"& ? " ep( Al!"& i 13 J@.

T(i#d, #e'l )u i&e c$cle !(e"#$ ' u+e '&d !(i i !(e ' u+p!i"& %#"+ w(ic( !(e!(e"#$ de#i e i! &'+e, !('! +"&e!'#$ p"lic$ i i##ele '&! %"# ec"&"+ic %luc!u'!i"&.Be%"#e #e'l )u i&e c$cle !(e"#$ e&!e#ed !(e de)'!ed i& !(e e'#l$ 13 0 , 'l+" ! 'll

+'c#"ec"&"+i ! '*#eed "& "&e p#"p" i!i"&8 +"&e$ +'!!e# .Re'l )u i&e c$cle !(e"#i ! (' e c('lle&*ed !('! iew u i&* !(e "ld Ke$&e i'& '#*u+e&!!('! '&$ c"##el'!i"& "% +"&e$ wi!( "u!pu! '#i e )ec'u e !(e +"&e$ uppl$ i e&d"*e&"u?Ki&* '&d 7l" e# 13 4@.

Se&t'()* S+i,t- 8

A&"!(e# &ew cl' ic'l 'pp#"'c( !" !(e )u i&e c$cle i !(e ec!"#'l (i%! !(e"#$, w(ic(e+p(' i e !(e c" !l$ 'd u !+e&! "% l')"# '+"&* ec!"# . Rece&! w"#k )$ D).id i*ie/

?13 2@ (' '#*ued !('! !(e p" i!i e c"##el'!i"& )e!wee& !(e di pe# i"& "% e+pl"$+e&!*#"w!( #'!e 'c#" ec!"# '&d !(e u&e+pl"$+e&! #'!e i+plie !('! ec!"#'l (i%! i& l')"# de+'&d '#e #e p"& i)le %"# ' u) !'&!i'l %#'c!i"& "% c$clic'l '#i'!i"& i& u&e+pl"$+e&!.T(e )u i&e -c$cle li!e#'!u#e !$pic'll$ ' u+e !('! '**#e*'!e di !u#)'&ce , '&d i&

p'#!icul'# '**#e*'!e de+'&d +" e+e&! , '#e !(e p#i+'#$ c'u e "% c$clic'l wi&* i&u&e+pl"$+e&!. T(e '**#e*'!e +"del u!ili ed )$ +'c#"ec"&"+i ! u u'll$ %'il !" !'kei&!" 'cc"u&! !(e p" i)ili!$ !('! (i%! i& !(e ec!"#'l c"+p" i!i"& "% de+'&d c'& (' e'd e# e +'c#" c"& e6ue&ce i& '& ec"&"+$ i& w(ic( #e "u#ce '#e &"! i& !'&!'&e"u l$+")ile 'c#" ec!"# . ilie& '#*ue !('! (i%! i& de+'&d %#"+ "+e ec!"# !" "!(e# ,#'!(e# !('& +" e+e&! i& !(e le el "% '**#e*'!e de+'&d, '#e i& %'c! #e p"& i)le %"# ('l%"# +"#e "% 'll c$clic'l '#i'!i"& i& u&e+pl"$+e&! i& !(e p" !w'# pe#i"d . illi'&e ide&ce "& !(i p"i&! 'ppe'# !" (' e )ee& #'!(e# widel$ 'ccep!ed. T(e '**#e*'!ede+'&d '&d ec!"#'l (i%! e5pl'&'!i"& %"# c$clic'l u&e+pl"$+e&! (' e p"!e&!i'll$ 6ui!edi%%e#e&! p"lic$ i+plic'!i"&. A pu#e ec!"#'l (i%! e5pl'&'!i"& ee+ !" #ule "u! ' u e%ul

#"le %"# '**#e*'!e de+'&d p"licie i& +"de#'!i&* u&e+pl"$+e&! %luc!u'!i"& . T(u !(ede*#ee !" w(ic( e'c( "% !(e e !w" p" i)le "u#ce c"&!#i)u!e !" c$clic'l u&e+pl"$+e&!i ' +'!!e# "% c"& ide#')le i+p"#!'&ce.

W)*()-i)/ p'#'di*+ )$ ' u+i&* !('! w(e& ' w"#ke# +" e %"#+ "&e ec!"# !" '&"!(e#,' pe#i"d "% u&e+pl"$+e&! i #e6ui#ed, pe#('p %"# ") e'#c( .Acc"#di&* !" !(e ec!"#(i%! !(e"#$, #ece i"& '#e pe#i"d du#i&* w(ic( !(e#e '#e +"#e ec!"#'l ("ck '&d !(u '*#e'!e# &eed %"# ec!"#'l 'd u !+e&!.

Al!("u*( !(e#e i !ill +uc( e+pi#ic'l w"#k )ei&* d"&e, !(e wei*(! "% !(e ' 'il')lee ide&ce 'ppe'# &"! !" upp"#! !(e ec!"#'l (i%! !(e"#$.


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E+pl"$+e&!, like "u!pu!, w"uld cle'#l$ #i e wi!( %' "#')le ("ck '&d %'ll wi!(u&%' "#')le ("ck . Bu! (' i&* #e ec!ed !(e e#$ &"!i"& "% i& "lu&!'#$ u&e+pl"$+e&!.(e& ' w"#ke# i l'id "%%, (e +u ! eek ' &ew "). He wei*( !(e 'lue "% !'ki&* 'l"we#-p'id ") !('! +i*(! )e e' il$ ' 'il')le ?' +'c(i&i ! +i*(! )ec"+e ' d'$ l')"#e#@'*'i& ! !(e 'lue "% ' )e!!e#-p'id, +"#e ui!')le ") !('! i ('#de# !" %i&d. T(e &ewcl' ic'l d" &"! '#*ue !('! !(e U&e+pl"$+e&! ") e'#c(e# i ('pp$ wi!( (i c("iceF

)ei&* l'id "%% w' ' )'d d#'w , '&d , like e e#$"&e, (e p#e%e# *""d luck !" )'d. R'!(e#,!(e$ '#*ue !('! !(e w"#k c("" e w('! (e #e*'#d ' !(e )e ! ' 'il')le "p!i"&, e e& w(e&!(e "p!i"& '#e p""#. T" #e+'i& u&e+pl"$ed ?'&d !" ("w up i& !(e u&e+pl"$+e&!!'!i !ic @ i "+e!(i&* !('! (e c("" e )' ed "& (i ud*+e&! !('! !(e )e&%i! "% !(ee'#c( "u!wei*( !(e c" ! 8 !(i i &"! '& e5cep!i"& !" !(e #ule !('! '+"u&! upplied e6u'l'+"u&! de+'&ded.

Hi*( u&e+pl"$+e&! #'!e c"i&cide wi!( l"w le el "% (elp w'&!ed 'd e#!i i&*?%)t+)(i/e Ab()+)m )/d )0(e/&e %)t1 234567

P('&y&*i&)* m'.eme/t ', 0'(8e(-;

T(e ec!"#'l (i%! !(e"#$ u**e ! !('! w"#ke# '#e +" i&* )e!wee& ec!"# du#i&*#ece i"& , !(e "pp" i!e 'ppe'# !" )e !(e c' e8 T(e +e' u#ed +" e+e&! "% w"#ke# i!#"&*l$ 7#"c$clic'l ? %e.i/ Mu(9+y )/d R'be(t T'9e* 234:67

M)/8i0 A/)*y-i-;

T(e e %i&di&* u**e ! !('! !(e ec!"#'l (i%! !(e"#$ i u&likel$ !" )e pl'u i)l$ #ec"&ciledwi!( ") e# ed ec"&"+ic %luc!u'!i"& .

Ad "c'!e "% !(e ec!"#'l (i%! !(e"#$ '#*ue !('! e ide&ce "% !(i "#! i &"! pe# u' i e. I!i p" i)le !('! )ec'u e !(e p#"ce "% ec!"#'l 'd u !+e&! #e6ui#e ' pe#i"d "% (i*(u&e+pl"$+e&! '&d l"w i&c"+e, i! l"we# !(e de+'&d %"# !(e p#"duc! "% 'll ec!"# .T(u ,

we +i*(! ") e# e l"w 'c'&cie '&d l"w +" e+e&! du#i&* #ece i"&, e e& i% #ece i"&'#e i&i!i'll$ c'u ed )$ !(e &eed !" #e'll"c'!e l')"# '+"&* ec!"# . I& !(i %"#+, i! i &"!

cle'#l$ ("w !" di !i&*ui ( e+pi#ic'll$ !(e ec!"#'l (i%! !(e"#$ %#"+ #e'l )u i&e c$cle!(e"#ie !('! e+p(' i e ec"&"+$-wide %luc!u'!i"& i& !ec(&"l"*$ "# Ke$&e i'& !(e"#ie!('! e+p(' i e %luc!u'!i"& i& '**#e*'!e de+'&d.

CONC USION

New Cl' ic'l M'c#"ec"&"+i ! '#e 'l " k&"w& %#e (w'!e# ec"&"+ic ?C(ic'*" Sc(""l


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"% Ec"&"+ic @ i& &e"cl' ic'l !#'di!i"&. T(e$ illu+i&'!e !(e di !i&c!i"& )e!wee& !(ee%%ec! "% '&!icip'!ed e# u u&'&!icip'!ed p"lic$ 'c!i"& . T(e$ e5pl'i&ed !('!

p"lic$+'ke# c'&&"! k&"w !(e "u!c"+e "% !(ei# deci i"& wi!("u! k&"w& !(e pu)lice5pec!'!i"& #e*'#di&* !(e+. New Cl' ic'l +'c#"ec"&"+ic +"del will )e e+p(' i ed' Be&c(+'#k +"del led !" !(e de el"p+e&! "% +"de#& +'c#" !(e"#$. T(e &ew

cl' ic'l (' e +'de u) !'&!i'l 'd '&ce wi!(i& !(ei# "w& p'#'di*+ . T" e5pl'i&ec"&"+ic %luc!u'!i"& , &ew cl' ic'l !(e"#i ! &"w e+p(' i ed !ec(&"l"*ic'ldi !u#)'&ce , i&!e#!e+p"#'l u) !i!u!i"& "% lei u#e, '&d #e'l )u i&e c$cle. I! i "di%%icul! !" e5pl'i& !('! +'c#"ec"&"+ic (' %"u&d !(e !' k "% c"&!#"lli&*, p#edic!i&* "#e e& e5pl'i&i&* ec"&"+ic %luc!u'!i"& . I+p#" e+e&! i& !(e !#'ck #ec"#d "%+'c#"ec"&"+ic will #e6ui#e !(e de el"p+e&! "% !(e"#ie !('! c'& e5pl'i& w($ e5c('&*e"+e!i+e w"#k well '&d "!(e# !i+e )#e'k d"w&.

RE:ERENCESF

M'&kiw 9#e*"#$.N A


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