Thank you for watching the video and for leaving your comments. If you are interested in more videos on Intermediate Macroeconomics, the full lecture can be found here: The Goods Market: th-cam.com/video/jgfSE6jAXWM/w-d-xo.html The Multiplier Effect: th-cam.com/video/9eeBixxQa_o/w-d-xo.html The IS Curve: th-cam.com/video/g6aba0V6ifo/w-d-xo.html Movements Along the Curve or Shifts of the Curve: th-cam.com/video/LR5S4xL0DJE/w-d-xo.html The Money Market: th-cam.com/video/I2iUZVoKkm0/w-d-xo.html The LM Curve: th-cam.com/video/A5jV_0ZIRU4/w-d-xo.html The IS-LM Model: th-cam.com/video/e_3clidGpfE/w-d-xo.html The Labor Market: th-cam.com/video/r8qRf_kIeek/w-d-xo.html The Phillips Curve: th-cam.com/video/c55Gz1oKr7w/w-d-xo.html The IS-LM-PC Model: th-cam.com/video/7zvc1ECNHAo/w-d-xo.html Exchange Rates: th-cam.com/video/QKf7fQCjfVY/w-d-xo.html Purchasing Power Parity: th-cam.com/video/00H3hXF85Ns/w-d-xo.html Interest Rate Parity: th-cam.com/video/_LVPhfBBGNs/w-d-xo.html Goods Market in the Open Economy: th-cam.com/video/CS-fjsU4XBQ/w-d-xo.html Fiscal Policy and the Multiplier in the Open Economy: th-cam.com/video/w5agukcULuo/w-d-xo.html Open Economy: Effects of Increases in Foreign Demand: th-cam.com/video/fCzqV8KEFhw/w-d-xo.html Open Economy: Effects of a Currency Depreciation: th-cam.com/video/zTza0XO-52Q/w-d-xo.html Reducing the Trade Deficit: th-cam.com/video/S5Mv-WC6iNk/w-d-xo.html The Marshall-Lerner Condition: th-cam.com/video/Yw3Y74DEge8/w-d-xo.html The Mundell-Fleming Model: th-cam.com/video/yRefsZdU1No/w-d-xo.html The Solow Model: th-cam.com/video/t8Q-2P0P3E4/w-d-xo.html The Solow Model with Technological Progress: th-cam.com/video/sP_eQoPMAKg/w-d-xo.html
This is the classic expression in case of the responsiveness.The Phillips curve shows there is an expectation leveraged wage price relationship in case of wage inflation which will endogenous in nature but the exogeneoous in responsiveness of the responsiveness in case of price say the percentage change in the price would be a great idea to represent the inflation in that case I am finding out an equation wherein the expected price hike or inflation is equal to the leveraged expectation of the wage rate inflation and both are equal. In this case we can find an useful responsiveness of wage rate to the inflation.As inflation rate is high then it is observed that the wage rate responses to the higher or in the case the inflationary elasticity of wage rate is higher.Thus we can conclude that the expectation of getting higher wages or stability is higher.To some extent it goes towards the cut down the unemployment rate.
could you please explain how does the approximation in the hold true when expected inflation ,actual inflation and markup are low also where did that approximation come from ?
Thank you for your question! Mathematically, this can be shown using a Taylor series expansion. At the point where expected inflation and actual inflation are zero, the approximation is perfect. If they are low, the approximation is typically quite good. You can also check with given numbers. For small values you will see that the approximation holds reasonably well, for larger inflation and expected inflation, the approximation gets worse.
If the effects of unemployment u and the catchall variable z exactly offset each other in the wage bargaining process, then wages would follow the expected price level (inflation is exactly compensated by a wage rise). This is only the case if we have "1" in the equation. If this term were absent, the wage would be zero, which does not make sense. I hope this helps.
Thank you for watching the video and for leaving your comments. If you are interested in more videos on Intermediate Macroeconomics, the full lecture can be found here:
The Goods Market: th-cam.com/video/jgfSE6jAXWM/w-d-xo.html
The Multiplier Effect: th-cam.com/video/9eeBixxQa_o/w-d-xo.html
The IS Curve: th-cam.com/video/g6aba0V6ifo/w-d-xo.html
Movements Along the Curve or Shifts of the Curve: th-cam.com/video/LR5S4xL0DJE/w-d-xo.html
The Money Market: th-cam.com/video/I2iUZVoKkm0/w-d-xo.html
The LM Curve: th-cam.com/video/A5jV_0ZIRU4/w-d-xo.html
The IS-LM Model: th-cam.com/video/e_3clidGpfE/w-d-xo.html
The Labor Market: th-cam.com/video/r8qRf_kIeek/w-d-xo.html
The Phillips Curve: th-cam.com/video/c55Gz1oKr7w/w-d-xo.html
The IS-LM-PC Model: th-cam.com/video/7zvc1ECNHAo/w-d-xo.html
Exchange Rates: th-cam.com/video/QKf7fQCjfVY/w-d-xo.html
Purchasing Power Parity: th-cam.com/video/00H3hXF85Ns/w-d-xo.html
Interest Rate Parity: th-cam.com/video/_LVPhfBBGNs/w-d-xo.html
Goods Market in the Open Economy: th-cam.com/video/CS-fjsU4XBQ/w-d-xo.html
Fiscal Policy and the Multiplier in the Open Economy: th-cam.com/video/w5agukcULuo/w-d-xo.html
Open Economy: Effects of Increases in Foreign Demand: th-cam.com/video/fCzqV8KEFhw/w-d-xo.html
Open Economy: Effects of a Currency Depreciation: th-cam.com/video/zTza0XO-52Q/w-d-xo.html
Reducing the Trade Deficit: th-cam.com/video/S5Mv-WC6iNk/w-d-xo.html
The Marshall-Lerner Condition: th-cam.com/video/Yw3Y74DEge8/w-d-xo.html
The Mundell-Fleming Model: th-cam.com/video/yRefsZdU1No/w-d-xo.html
The Solow Model: th-cam.com/video/t8Q-2P0P3E4/w-d-xo.html
The Solow Model with Technological Progress: th-cam.com/video/sP_eQoPMAKg/w-d-xo.html
This is the classic expression in case of the responsiveness.The Phillips curve shows there is an expectation leveraged wage price relationship in case of wage inflation which will endogenous in nature but the exogeneoous in responsiveness of the responsiveness in case of price say the percentage change in the price would be a great idea to represent the inflation in that case I am finding out an equation wherein the expected price hike or inflation is equal to the leveraged expectation of the wage rate inflation and both are equal.
In this case we can find an useful responsiveness of wage rate to the inflation.As inflation rate is high then it is observed that the wage rate responses to the higher or in the case the inflationary elasticity of wage rate is higher.Thus we can conclude that the expectation of getting higher wages or stability is higher.To some extent it goes towards the cut down the unemployment rate.
could you please explain how does the approximation in the hold true when expected inflation ,actual inflation and markup are low also where did that approximation come from ?
Thank you for your question! Mathematically, this can be shown using a Taylor series expansion. At the point where expected inflation and actual inflation are zero, the approximation is perfect. If they are low, the approximation is typically quite good. You can also check with given numbers. For small values you will see that the approximation holds reasonably well, for larger inflation and expected inflation, the approximation gets worse.
why do we add a 1 in the 1-au+z equation?
If the effects of unemployment u and the catchall variable z exactly offset each other in the wage bargaining process, then wages would follow the expected price level (inflation is exactly compensated by a wage rise). This is only the case if we have "1" in the equation. If this term were absent, the wage would be zero, which does not make sense. I hope this helps.
Nice 👍
Thank you!
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