Aggregate production function, Macroeconomics

Assignment Help:

The aggregate production function

Definition

Imagine the national economy during a short period of time (say one week). We refer: 

  • L: total amount of work used during this period (by all individuals in the economy).
  • K: total amount of capital used.
  • Y: total amount of finished goods produced during this period (real).

It is still the case that Y and L are flows whereas K is a stock. During a short period of time, we can presume that amount of capital is constant. 

Aggregate production function, or simply production function is a function which relates L, K and Y. Precisely, we presume that Y is a function of L and K: 

Y = f (L, K)

In most cases, we won't specify exactly what the function f looks like. Though we always presume that f is increasing in L and K, which is, when we use more labour and/or more capital, we would produce more goods.


Related Discussions:- Aggregate production function

International trade, How can achieve mutual gain from international trade?

How can achieve mutual gain from international trade?

Impact will high and variable rates of inflation, What impact will high and...

What impact will high and variable rates of inflation have on the economy? How will they influence the risk accompanying long-term contracts and related business decisions?

Explain the pre-emptive monetary policy, Explain the pre-emptive monetary p...

Explain the pre-emptive monetary policy Since 1992 UK monetary policy has been 'pre-emptive'. In pre-emptive monetary policy authorities announce that they are prepared to rai

The monetary system.., bank A has a leverage ratio of 10 while bank B has a...

bank A has a leverage ratio of 10 while bank B has a leverage ratio of 20 similar losses on bank loans at the two banks cause the value of their assets to fall by 7 percent. Which

Explain gdp, You are given the following information about an economy: ...

You are given the following information about an economy: Gross Investment  =                                                         40 Govt. purchases of goods & service =

Montary policy, Examine the efficiency of quanttitative credit control inst...

Examine the efficiency of quanttitative credit control instrument

Budget constraint, The consumer's utility function is u(x1,x2) = (x1) (x2)^...

The consumer's utility function is u(x1,x2) = (x1) (x2)^2 (a) Graph his budget constraint for p1 = 3, p2 = 2 and M = 900, and write down the equation for his budget line. (b)

Profit maximizing firm, A profit maximizing firm has a production function ...

A profit maximizing firm has a production function such that: Y=K2L2 a) If P=10,rk=2,andWL=3 , what would be its optimum be? How can you show that it is a maximum? b) How

calculate the npv and pricing models, Burwood Mining is raising capital ...

Burwood Mining is raising capital of $500,000 for its next project from the following sources: Sources Amount $ Common stock 100,000

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd