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What are the advantages of leaving resource allocation to price allocation? Ans) The 5 benefits are Neutral, Flexible, Freedom of choice, No administrative cost and lastly Dimin
Effects of consumption function.
ACCOUNTING SYSTEM-EXAMPLE Let us now introduce a complication. There are three firms in the production sector. The Fruit Extracts Company manufactures from raw fruit, fruit ext
Consider the case of cleaning up chemical contamination at an industrial site. The marginal benefits of additional cleanup are decreasing as the amount of cleanup increases. Howeve
In order to observe the correlations between each variable, the most effective method to use is Vector Autoregression (VAR). VAR estimation uses a system of simultaneous equations
Assume the marginal propensity to consume = .8, and government purchases increase by $.2 Trillion. 1. Potentially, how much will real GDP increase in the short-run after the inc
What is Cost-push inflation Cost-push inflation takes place when costs of production increase causing short-run aggregate supply curve to shift to left. The main causes of c
Real Exchange Rates (EXCH) is the next variable that will be analysed in this VAR. The reason for including exchange rates in the VAR is that they are an important channel through
Mathematical Presentation: Consider the utility function U = U(x 1 , x 2 ). Differentiating totally, we get the following: dU = U 1 dx 1 + U 2 dx 2 = 0 (as along the indiffe
What is money and what is not money If you are trying to conclude if something is money, simply consider whether it would be accepted in most stores as payment. You then realiz
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