4 KEYNESIAN MULTIPLIER MODEL

DOI: 10.4324/9780429324406-4

4.1 ECONOMIC PROBLEM

In the previous chapters we studied the dynamics of a single market in a microeconomic setting. We now move on to analyse the macroeconomy, which is the study of the whole economy encompassing all the markets, such as labour market, product market, financial market and all the institutions such as governments, central banks etc. Alternatively, one could think of the macroeconomy as a network of markets and institutions interconnected through multilevel feedback mechanisms that evolve over time. Therefore, the study of macroeconomics – the study of the whole economy – deals with an evolving complex system. There are two methodological approaches in macroeconomics. ...

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