Why does Blanchard use simplified models?
I find it crucial to start with simplified models, like the IS-LM or basic Phillips curves. These stripped-down frameworks allow us to clearly isolate and understand the core mechanisms at play in the economy. Once these fundamental relationships are established, we can then systematically introduce more complex elements – such as sticky prices, imperfect information, or labor market rigidities – to build models that better reflect the complexities of the actual world and inform policy.
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