Keynesian School: Difference between revisions
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→File:Newkeynes.png New Keynesianism
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===[[File:Newkeynes.png]] New Keynesianism===
'''New Keynesianism''' is a macroeconomic school of thought that strives to provide more consistent micro-foundations to Keynesianism in response to sustained attacks from New
Like Neo-Keynesianism, New Keynesianism is Keynesian in the short run but neoclassical in the long run.
However, unlike the neoclassical synthesis, New Keynesianism attempts to provide theoretical explanations for a variety of market failures.
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* '''New Keynesian DSGE model:''' Enterprises and households are assumed to have rational expectations, but prices are set by monopolistically competitive firms and can't shift quickly or without cost.
* '''New Keynesian Phillips Curve:''' Like an expectations-augmented Phillips curve, it implies that the trade-off between unemployment and inflation is only applicable in the short run.
==Tenets==
Keynesianism advocates for appropriate fiscal (by the government) and monetary (by the central bank) policies to manage aggregate demand to correct the boom and bust cycles. He also desires full employment.
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