Economics 314 Coursebook , 2010 Jeffrey Parker 10 AGGREGATE SUPPLY WITH IMPERFECT INFORMATION

A. Topics and Tools ............................................................................ 1 B. The Lucas Model in Historical Perspective ............................................ 2 Keynesian macroeconomics in the 1960s ......................................................................... 2 Monetarism ................................................................................................................. 3 The analytical framework of the Keynesian/monetarist debate ......................................... 4 Rational expectations .................................................................................................... 5 Policy ineffectiveness ..................................................................................................... 6 Lucas and macroeconomic modeling .............................................................................. 7 C. Understanding Romer’s Chapter 6, Part A ............................................ 8 The basic idea .............................................................................................................. 8 Modeling considerations ................................................................................................ 9 Romer’s formalization of the Lucas model ..................................................................... 10 The signal-extraction problem ...................................................................................... 12 Policy ineffectiveness ................................................................................................... 14 D. Aggregate Supply and Demand and the Lucas Model .............................. 15 E. Suggestions for Further Reading ........................................................ 17 Collections of research papers on rational expectations and Lucas model .......................... 17 Surveys of the main results of rational expectations models ............................................. 18 F. Works Cited in Text ....................................................................... 18