General Equilibrium Simulations and Keynesian Economic Analysis: Some Simple Microfoundations from an Old Fashioned General Equilibrium Perspective.

From: The American Journal of Economics and Sociology | Date: April 1, 2000| Author: | Copyright information

CLARENCE C. MORRISON [*]

ABSTRACT. Using a general equilibrium model that is completely free of macroeconomic aggregates, this paper addresses some questions that are central to macroeconomics. Keynes' underemployment equilibrium is replicated, but it is illustrated that this result rests on the assumption that stockholders are so pessimistic that they save (hoard) all unanticipated dividends for a rainy day. If stockholders spend their unanticipated dividends in the next time period it is illustrated that unemployment will converge to zero over time. This process can be ...

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