{"id":479,"date":"2015-06-30T21:50:32","date_gmt":"2015-06-30T21:50:32","guid":{"rendered":"https:\/\/pressbooks.ccconline.org\/accmacro\/chapter\/glossary-keynesian-and-neoclassical-economics\/"},"modified":"2023-07-14T19:07:52","modified_gmt":"2023-07-14T19:07:52","slug":"glossary-keynesian-and-neoclassical-economics","status":"publish","type":"chapter","link":"https:\/\/pressbooks.ccconline.org\/accmacro\/chapter\/glossary-keynesian-and-neoclassical-economics\/","title":{"raw":"Glossary: Keynesian and Neoclassical Economics","rendered":"Glossary: Keynesian and Neoclassical Economics"},"content":{"raw":"<h2>The Keynesian Perspective<\/h2>\n<dl>\n<dt>contractionary fiscal policy<\/dt>\n<dd>tax increases or cuts in government spending designed to decrease aggregate demand and reduce inflationary pressures<\/dd>\n<dt>coordination argument<\/dt>\n<dd>downward wage and price flexibility requires perfect information about the level of lower compensation acceptable to other laborers and market participants<\/dd>\n<dt>disposable income<\/dt>\n<dd>income after taxes<\/dd>\n<dt>expansionary fiscal policy<\/dt>\n<dd>tax cuts or increases in government spending designed to stimulate aggregate demand and move the economy out of recession<\/dd>\n<dt>expenditure multiplier<\/dt>\n<dd>Keynesian concept that asserts that a change in autonomous spending causes a more than proportionate change in real GDP<\/dd>\n<dt>inflationary gap<\/dt>\n<dd>equilibrium at a level of output above potential GDP<\/dd>\n<dt>macroeconomic externality<\/dt>\n<dd>what occurs at the macro level is different from the sum of what happens at the micro level; an example would be where upward-sloping market supply curves become a flat aggregate supply curve<\/dd>\n<dt>menu costs<\/dt>\n<dd>costs firms face in changing prices<\/dd>\n<dt>Phillips curve<\/dt>\n<dd>the tradeoff between unemployment and inflation<\/dd>\n<dt>real GDP<\/dt>\n<dd>the amount of goods and services actually being sold in a nation<\/dd>\n<dt>recessionary gap<\/dt>\n<dd>equilibrium at a level of output below potential GDP<\/dd>\n<dt>sticky wages and prices<\/dt>\n<dd>a situation where wages and prices do not fall in response to a decrease in demand, or do not rise in response to an increase in demand<\/dd>\n<\/dl>\n<h2>The Neoclassical Perspective<\/h2>\n<dl>\n<dt>adaptive expectations<\/dt>\n<dd>the theory that people look at past experience and gradually adapt their beliefs and behavior as circumstances change<\/dd>\n<dt>expected inflation<\/dt>\n<dd>a future rate of inflation that consumers and firms build into current decision making<\/dd>\n<dt>neoclassical perspective<\/dt>\n<dd>the philosophy that, in the long run, the business cycle will fluctuate around the potential, or full-employment, level of output<\/dd>\n<dt>physical capital per person<\/dt>\n<dd>the amount and kind of machinery and equipment available to help a person produce a good or service<\/dd>\n<dt>rational expectations<\/dt>\n<dd>the theory that people form the most accurate possible expectations about the future that they can, using all information available to them<\/dd>\n<\/dl>","rendered":"<h2>The Keynesian Perspective<\/h2>\n<dl>\n<dt>contractionary fiscal policy<\/dt>\n<dd>tax increases or cuts in government spending designed to decrease aggregate demand and reduce inflationary pressures<\/dd>\n<dt>coordination argument<\/dt>\n<dd>downward wage and price flexibility requires perfect information about the level of lower compensation acceptable to other laborers and market participants<\/dd>\n<dt>disposable income<\/dt>\n<dd>income after taxes<\/dd>\n<dt>expansionary fiscal policy<\/dt>\n<dd>tax cuts or increases in government spending designed to stimulate aggregate demand and move the economy out of recession<\/dd>\n<dt>expenditure multiplier<\/dt>\n<dd>Keynesian concept that asserts that a change in autonomous spending causes a more than proportionate change in real GDP<\/dd>\n<dt>inflationary gap<\/dt>\n<dd>equilibrium at a level of output above potential GDP<\/dd>\n<dt>macroeconomic externality<\/dt>\n<dd>what occurs at the macro level is different from the sum of what happens at the micro level; an example would be where upward-sloping market supply curves become a flat aggregate supply curve<\/dd>\n<dt>menu costs<\/dt>\n<dd>costs firms face in changing prices<\/dd>\n<dt>Phillips curve<\/dt>\n<dd>the tradeoff between unemployment and inflation<\/dd>\n<dt>real GDP<\/dt>\n<dd>the amount of goods and services actually being sold in a nation<\/dd>\n<dt>recessionary gap<\/dt>\n<dd>equilibrium at a level of output below potential GDP<\/dd>\n<dt>sticky wages and prices<\/dt>\n<dd>a situation where wages and prices do not fall in response to a decrease in demand, or do not rise in response to an increase in demand<\/dd>\n<\/dl>\n<h2>The Neoclassical Perspective<\/h2>\n<dl>\n<dt>adaptive expectations<\/dt>\n<dd>the theory that people look at past experience and gradually adapt their beliefs and behavior as circumstances change<\/dd>\n<dt>expected inflation<\/dt>\n<dd>a future rate of inflation that consumers and firms build into current decision making<\/dd>\n<dt>neoclassical perspective<\/dt>\n<dd>the philosophy that, in the long run, the business cycle will fluctuate around the potential, or full-employment, level of output<\/dd>\n<dt>physical capital per person<\/dt>\n<dd>the amount and kind of machinery and equipment available to help a person produce a good or service<\/dd>\n<dt>rational expectations<\/dt>\n<dd>the theory that people form the most accurate possible expectations about the future that they can, using all information available to them<\/dd>\n<\/dl>\n","protected":false},"author":32,"menu_order":238,"template":"","meta":{"pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-479","chapter","type-chapter","status-publish","hentry"],"part":428,"_links":{"self":[{"href":"https:\/\/pressbooks.ccconline.org\/accmacro\/wp-json\/pressbooks\/v2\/chapters\/479","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/pressbooks.ccconline.org\/accmacro\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/pressbooks.ccconline.org\/accmacro\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/accmacro\/wp-json\/wp\/v2\/users\/32"}],"version-history":[{"count":1,"href":"https:\/\/pressbooks.ccconline.org\/accmacro\/wp-json\/pressbooks\/v2\/chapters\/479\/revisions"}],"predecessor-version":[{"id":480,"href":"https:\/\/pressbooks.ccconline.org\/accmacro\/wp-json\/pressbooks\/v2\/chapters\/479\/revisions\/480"}],"part":[{"href":"https:\/\/pressbooks.ccconline.org\/accmacro\/wp-json\/pressbooks\/v2\/parts\/428"}],"metadata":[{"href":"https:\/\/pressbooks.ccconline.org\/accmacro\/wp-json\/pressbooks\/v2\/chapters\/479\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/pressbooks.ccconline.org\/accmacro\/wp-json\/wp\/v2\/media?parent=479"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/accmacro\/wp-json\/pressbooks\/v2\/chapter-type?post=479"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/accmacro\/wp-json\/wp\/v2\/contributor?post=479"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/pressbooks.ccconline.org\/accmacro\/wp-json\/wp\/v2\/license?post=479"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}