What is the new Keynesian Economics?
Many theories that make up a modern macroeconomic study are based on ideas presented by John Maynard Keynes in the 30th year. The Keynesian economy serves as a basis for many other economic theories and is based on the idea that prices and wages automatically adapt to the market. During the end of the 20th century, however, modern economists have published a number of critics focused on classic Keynesian models. This criticism creates a new school of economic theory known as the new Keynesian Economics. Within the new Keynesian economy, prices and wages adapt to much slower than in classic Keynesian models, leading to a certain inevitable level of involuntary unemployment. For example, during the inflation period when people spend free money, the demand for products in all industries will be relatively high. Signals with high demand for hiring ore and increase production, resulting in higher wages. These higher wages combined with highDemand then leads the company to accounting more for their products by increasing prices.
On the basis of Keynes' theories, as prices are rising, demand will begin to reduce, leading companies to release workers and reducing wages. Changes in price and wage will then cause this cycle to repeat again. According to this model, the economy is sought in the short term and the government intervention is not necessary.
Based on the new Keynesian economy, prices and wages are not automatically modified, as was the case in the classic model. Instead, the new Keynesian Economics assumes that prices and wages are sticky and are time to adapt. This means that people will be unemployed longer than they would be under classical Keynesian theories. One of the main concepts of the new Keynesian economy is that the great percentage of staff is involuntary and that many people who want to work are unable to find a job.
these neokesovModels are trying to define precisely why prices and wages are slowly responding to market changes. One of the ideas is that price changes require time due to the cost of the offer or expenditure facing the business because it reprints in brochures, offers or other data sheets. Another proposal is that businesses are slowly falling prices when demand decreases because they cannot be sure how it will affect their lower limit. Theoretically, consumers buy more as a whole when prices fall, but models do not show exactly how it affects individual suppliers or businesses.
The new Keynesian Economics emphasizes the need for greater government intervention in the short term. This includes changing interest rates to increase or reduce money supply and stimuling jobs. In the context of classic keynesian models, this type of intervention is only necessary to encourage long -term changes, the net short -term.