Neoclassical Synthesis

Question 1

Main difference in between Neoclassical Synthesis and Keynesian Model

Answer 1

Neoclassical Synthesis :
Prices are flexible
Driven by Employment at the
labor market

Keynesian Model:
Prices are fixed
Driven by Aggregate demand at
the goods market

Question 2

Assuming that firms produce goods using only labor, the production function can be written as:

Answer 2

𝑌 = AN

N = employment
A = labor productivity, output per worker

Question 3

WS

Answer 3

𝑊 = 𝑃𝑒𝐹 (𝑢, 𝑧)

𝑊
——- = 𝑓(𝑢, 𝑧)
𝑃𝑒

u = unemployment rate

Question 4

PS

Answer 4

𝑃 = (1 + 𝑚) W

 𝑊                1 ------------ =  --------------
  𝑃               1 + m

Question 5

The natural rate of unemployment

Answer 5

medium run: P = Pe

                   1 𝑓(𝑢, 𝑧)  =  --------------
                1 + m

Question 6

From unemployment to employment

Answer 6

see pg 85