Keynesian Model: Background (Short-Run)

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Keynesian Model In The Short-Run: Background

  • focus is on spending — if people spend enough, economy will be fine.

  • understand why different parties spend and how it affects the economy.

  • key actors — people (consumption), businesses (investment), and government (govt. spending)

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Key Assumptions

  • hold interest rates constant

  • hold prices constant

  • hold expectations constant

  • one-time period — (this is the “short-run”)

— John Maynard Keynes: The General Theory, 1936

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