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Mankiw Model of Nominal Rigidities There are two related reasons for which firms do not frequently change prices. First, as we saw in the discussion on menu costs, the cost
1. The price of a CD (PC) is $10 and the price of a DVD (PD) is $20. Philip has his income (M) of $100 to spend on the two goods. Consider three consumption bundles: (C, D) = (2, 3
Stable and Unstable Equilibrium An equilibrium is said to be stable equilibrium when economic forces tend to push the market towards it. In other words, any divergence from t
CHARACTERISTICS OF THE THREE STAGES Stage I Here the Total Physical Product, Average Physical Product and Marginal Physical Product are all increasing. However MPP
Explain how managerial economics is useful for decision making
CENTRAL BANK A modern central bank performs so many functions of different nature that it is difficult to give any brief yet accurate definition of a central bank. Any definiti
Meaning of Fiscal Policy In this general theory, Keynes used fiscal policy when referring to the influence of taxation on saving and government investment spending financed thr
the overall idea of market segmentation
Advantages a. It is more equitable. The broader shoulders are asked to carry the heavier burden. b. It satisfies the canon of productivity as it yields
Increase in demand SS is the supply curve and D 1 D 1 the initial demand curve shifts to the right, to position D 2 D 2 . P 1 is the initial equilibrium price and q 1
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