It's only hours away from my exam but i'm online. guess why!???! because my textbooks are insufficient in covering some of the topics tested (not that they appeared in the study guide in the first place.) In an attempt to memorise the text i've just read moments ago, i've decided to blog it down.
1. Barro-Gordon Model & Kydland Prescott.
shit. i forgot what it's about. Read this last night. hmm.... *think hardz*... Oh oh. Time inconsistency problems. Time inconsistency polices are those that are optimal during one time yet sub-optimal in another. This leads to the tendency for policy makers to "cheat" on their precommitments (something like transport price hike or cinema ticketing though they are not exactly policy but they do in a way affect our expectations of future income hence our consumption expenditure). Barro-Gordon suggested the incorporation of reputation into policy decisions. There are 3 scenarios,1. stick to the ideal policy which is time inconsistent and maintain reputation. 2. If there aint no reputation to start with, then go for non zeroinflation policy. 3. Perfect cheating to get superior results in a one period game. E.g., Annoucement of no price hiking in the "near" future. consumers get the signal of lower prices for a longer time, expectations of future income to stay the same or increase hence consumption expenditure rises to increase output. But in the "near" future, there IS a price hike which decreases the real wages of people but they have already bought other goods and services. Why superior results? it's obvious from the rise in inflation that leads to lower unemployment yet at the same time achieving high output. BUT BUT BUT BUT there is a clause to this. Private sectors will issue punishment for the damn ones if they cheat by treating all future annoucements as "cheating" annoucements. Credibility is loss and sacrifice ratio might increase. Eh, the last part i add myself one. Can't be bothered to continue reading already. This is all i can remmeber. Kydland Prescott is even easier. They just say time inconsistency problem is the fundamental obstacle to optimal macroeconomic policy design. So to go round that, economic policy should be used to select best operating policy rules instead. and that's about all i read! haha
2. Walras Law: In a n-markets system, if (n-1) markets are in equilibrium, then the nth market is also in equilibrium. In other words, if one market has excess supply over demand, there must be at least another market with excess demand over supply. This will then satisfy the assumption that aggregate demand = aggregate supply. Applying that to money demand market, since quantity theory of money aggregates into 2 markets, i.e. the money market and other goods market and the assumption that bonds is the only alternative to money, Then if money market is in equilibrium, so will the bond market. Therefore it is prudent to ignore the bond market. Prudency however, in accounting tells us that all these are bullshit.
3. Big field match. ahaha i simply love it. I still remember someone bought bananas for us to eat. I think we acted rather dumb during that match which we lost 3-1 but i enjoyed it alot. Thanks to the organiser again!! =) memorable lah!
Okie. To those who read thru this, I'll ask eugene to give u all a treat to a crabby dinner. Those who never...sorrie. wah. so much less time to study!! bye BYE!
1. Barro-Gordon Model & Kydland Prescott.
shit. i forgot what it's about. Read this last night. hmm.... *think hardz*... Oh oh. Time inconsistency problems. Time inconsistency polices are those that are optimal during one time yet sub-optimal in another. This leads to the tendency for policy makers to "cheat" on their precommitments (something like transport price hike or cinema ticketing though they are not exactly policy but they do in a way affect our expectations of future income hence our consumption expenditure). Barro-Gordon suggested the incorporation of reputation into policy decisions. There are 3 scenarios,1. stick to the ideal policy which is time inconsistent and maintain reputation. 2. If there aint no reputation to start with, then go for non zeroinflation policy. 3. Perfect cheating to get superior results in a one period game. E.g., Annoucement of no price hiking in the "near" future. consumers get the signal of lower prices for a longer time, expectations of future income to stay the same or increase hence consumption expenditure rises to increase output. But in the "near" future, there IS a price hike which decreases the real wages of people but they have already bought other goods and services. Why superior results? it's obvious from the rise in inflation that leads to lower unemployment yet at the same time achieving high output. BUT BUT BUT BUT there is a clause to this. Private sectors will issue punishment for the damn ones if they cheat by treating all future annoucements as "cheating" annoucements. Credibility is loss and sacrifice ratio might increase. Eh, the last part i add myself one. Can't be bothered to continue reading already. This is all i can remmeber. Kydland Prescott is even easier. They just say time inconsistency problem is the fundamental obstacle to optimal macroeconomic policy design. So to go round that, economic policy should be used to select best operating policy rules instead. and that's about all i read! haha
2. Walras Law: In a n-markets system, if (n-1) markets are in equilibrium, then the nth market is also in equilibrium. In other words, if one market has excess supply over demand, there must be at least another market with excess demand over supply. This will then satisfy the assumption that aggregate demand = aggregate supply. Applying that to money demand market, since quantity theory of money aggregates into 2 markets, i.e. the money market and other goods market and the assumption that bonds is the only alternative to money, Then if money market is in equilibrium, so will the bond market. Therefore it is prudent to ignore the bond market. Prudency however, in accounting tells us that all these are bullshit.
3. Big field match. ahaha i simply love it. I still remember someone bought bananas for us to eat. I think we acted rather dumb during that match which we lost 3-1 but i enjoyed it alot. Thanks to the organiser again!! =) memorable lah!
Okie. To those who read thru this, I'll ask eugene to give u all a treat to a crabby dinner. Those who never...sorrie. wah. so much less time to study!! bye BYE!
3 Comments:
but he's already treating me...so how?
does it mean a double treat?!!?
muahahaha
i'll check with him then... probably can give u cash refund.
wah sia lah
Post a Comment
<< Home