AD–IA model: Difference between revisions

Revision as of 06:27, 23 June 2014

Revision as of 09:21, 5 January 2015

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This model is further advanced in higher levels of undergraduate studies.

Economist [[David Romer]] proposed in the ''[[Journal of Economic Perspectives]]'' in 2000 that the LM curve be replaced in the [[IS–LM]] model.<ref>http://elsa.berkeley.edu/~dromer/papers/JEP_Spring00.pdf</ref>{{cite journal |last=Romer suggested|first=David that|year=2000 although|title=Keynesian theMacroeconomics Federal Reserve uses [[open market operation]]s to impactwithout the federal funds rate, they are not targeting money supply, but rather the interest rate. Therefore, he suggests removing the LM curve and replacing it with the MP curve.

LM Curve |journal=''[[Journal of Economic Perspectives]]'' |volume=14 |issue=2 |pages=149–169 |doi=10.1257/jep.14.2.149 }}</ref> Instead, Romer suggested that although the Federal Reserve uses [[open market operation]]s to impact the federal funds rate, they are not targeting money supply, but rather the interest rate. Therefore, he suggests removing the LM curve and replacing it with the MP curve.

==See also==