Chapter 16: Equilibrium in a Macroeconomic Model

C16Read.pdf 3 The Model in Words: Equilibrium (defined as a state in which there is no tendency to change or a position of rest) will be found when the desired amount of output demanded by all the agents in the economy exactly equals the amount produced in a given time period. There are three classes of demanders or buyers of goods: consumers, firms, and the

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The new graphical IS-PC-MR model is a simple version of the one commonly used in central banks and captures the forward-looking thinking engaged in by the policy maker. We show how it can be modified to include a forward-looking IS curve and how it relates to current debates in monetary macroeconomics, including the New Keynesian Phillips

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