AD–IA model: Difference between revisions

Revision as of 20:44, 13 March 2012

Revision as of 02:52, 27 April 2013

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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{{Citation needed|date=July 2010}}<ref>http://elsa.berkeley.edu/~dromer/papers/JEP_Spring00.pdf</ref> that the LM curve be replaced in the [[IS-LM]] model. Romer suggested that although the Federal Reserve uses open market operations 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==

* [[Federal Reserve System]]

* [[IS-LM]]

* [[IS/MP model]]

* [[Monetary policy]]

* [[Real Business Cycle Theory]]