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In the diagram, the long-run Phillips curve is the vertical red line. The NAIRU theory says that when unemployment is at the rate defined by this line, inflation will be stable. However, in the short-run policymakers will face an inflation-unemployment rate trade-off marked by the "Initial Short-Run Phillips Curve" in the graph.
Beveridge curve of vacancy rate and unemployment rate data from the United States Bureau of Labor Statistics. A Beveridge curve, or UV curve, is a graphical representation of the relationship between unemployment and the job vacancy rate, the number of unfilled jobs expressed as a proportion of the labour force. It typically has vacancies on ...
Attempting to explain unemployment and recessions, he noticed the tendency for people and businesses to hoard cash and avoid investment during a recession. He argued that this invalidated the assumptions of classical economists who thought that markets always clear, leaving no surplus of goods and no willing labor left idle. [3]
The non-accelerating inflation rate of unemployment (NAIRU) [1] is a theoretical level of unemployment below which inflation would be expected to rise. [2] It was first introduced as the NIRU (non-inflationary rate of unemployment) by Franco Modigliani and Lucas Papademos in 1975, as an improvement over the "natural rate of unemployment" concept, [3] [4] [5] which was proposed earlier by ...
The classical general equilibrium model aims to describe the economy by aggregating the behavior of individuals and firms. [1] Note that the classical general equilibrium model is unrelated to classical economics , and was instead developed within neoclassical economics beginning in the late 19th century.
The Keynesian cross diagram is a formulation of the central ideas in Keynes' General Theory of Employment, Interest and Money. It first appeared as a central component of macroeconomic theory as it was taught by Paul Samuelson in his textbook, Economics: An Introductory Analysis .
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Real business-cycle theory (RBC theory) is a class of new classical macroeconomics models in which business-cycle fluctuations are accounted for by real, in contrast to nominal, shocks. [1] RBC theory sees business cycle fluctuations as the efficient response to exogenous changes in the real economic environment.