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MULTIPLIER EFFECTS IN A NEOCLASSICAL MODEL WITH A PRODUCTION LAG (*)
Author(s) -
Thomas J.
Publication year - 1992
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/j.1467-999x.1992.tb00719.x
Subject(s) - economics , lag , multiplier (economics) , keynesian economics , consumption (sociology) , production (economics) , government spending , rational expectations , new keynesian economics , econometrics , wage , aggregate demand , phillips curve , macroeconomics , microeconomics , monetary policy , labour economics , market economy , sociology , computer science , welfare , computer network , social science
The paper examines the effects of introducing a one‐period production lag into what is otherwise a fairly standard macroeconomic model. Depending upon the relative elasticities of aggregate demand and supply it is possible that such a neoclassical model can produce extreme Keynesian results. The response of output to changes in government consumption can be greater even than the simple multiplier; this effect can be greater under rational expectations than under adaptative expectations. Introducing an efficiency wage story into the model leads naturally to the existence of a Phillips curve.