Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Determination of L in the cross model
As firms will produce less than YOPT, they require less labor than LOPT. We can determine exactly how much L they need in order to produce Y* and this level of L is denoted by L*.
Figure: Determination of L in the cross model
1. Start at bottom left. Here equilibrium level of GDP (denoted by Y*) is determined. We can add Y* on the y-axis as well because YD = Y* in equilibrium.
2. Extend Y* to bottom-right graph. This is aggregate supply.
3. From the production function we can determine exactly how much labor we need to produce Y*. This amount is signified by L*.
4. Extend L* up to upper right-hand graph. As real wage is fixed, we should be on horizontal line and we find the equilibrium for the labor market.
5. In the same figure you would also find LOPT, quantity of labor firms would choose if aggregate demand was enough.
Note a crucial difference amid classical and Keynesian model: in classical model we first figure out L and go from L to Y whereas in cross model we go from Y to L.
Suppose a firm raises $23 million dollars by issuing debt at a cost of 6.1%, raises $14 million by issuing common stock at a cost of 8.6% and raises an additional $10 million by is
Question 1 Consider an investor who has the von Neumann-Morgenstern utility index u(x ) = 3 + 4√ x An investment provides income according to two possible future scenari
Panzer is a U.S. company. It originated in the 1970s as a family-owned business that manufactures fine watches. The family continued to build the company by reinvesting profits in
Which of these variables are discrete and which are continuous random variables? a) The number of new accounts established by a salesperson in a year. b) The time between customer
Suppose that an individual stock's return is normally distributed with a mean of 11% and a standard deviation of 5%. What is the probability that the stock's return will be less th
Q. Describe Endogenous growth theory? Endogenous growth theory or new growth theory was developed in the 1980s by Paul Romer and others. In neo-classical model, technological p
The managers of Firm A recommend that Firm A purchase Firm B because the purchase will diversify the business of Firm A. Diversification of risks is a desirable strategy for indivi
Fiscal Policy An Increase in Government Spending: Figure 1 Let us examine how an increase in government spending affects the interest rate and the level of income.
Give detail explanation of Exchange Rate In most countries, exchange rate is expressed using foreign currency as base currency. For instance, in Denmark, USD exchange rate woul
Over the past few years there has been much concern about falling housing prices, and some policy makers have argued that the government should put a floor under prices so that the
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!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd