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Augmented Saving
An alternative way of determining equilibrium GDP is to find the level of income where the sum of desired injections equals the sum of desired leakages. Desired injections include Investment (I), Government Spending (G), and Exports (X). Leakages include Saving (S), Taxes (T), and Imports (M). Thus, the condition for equilibrium is: S + T + M = I + G + XSubtracting G and M from both side of the above equation gives S + (T - G) = I + (X - M)This equation can be interpreted as a generalization of the condition that saving equals investment, since it says that national saving equals asset formation.What happens when desired national assets formation exceeds desired national saving? Firms will respond to the imbalance by producing more, moving the economy towards equilibrium.What happens when desired national saving is more than desired national asset formation?Firms will cut back on output in order to avoid accumulating excess inventories, and the economy will move towards equilibrium.
What are the Two types of money In most countries, one can identify two "types of money": Currency and coins Bank deposits Total value of all the money in a
Q. Explain the problem with IS-LM model? The starting point of AS-AD model is an assumption in IS-LM model (and in the cross model) that limits its usefulness. This is an assum
Suppose that quantity demand falls by 30% as a result of a 5% increase in price. What would be the price elasticity of demand for this good?
C=100+0.75Yd How do i calculate marginal propensity to consume?
Suppose that a security costs $3,000 today and pays off some amount b in one year. Suppose that b is uncertain according to the following table of probabilities: b: $3,000 $3,300 $
The IS-curve in the AS-AD model The IS-curve is not affected by P in the AS-AD model We can define an IS-curve in the AS-AD model similarly to
tax be cut as the main policy target
What are the trends of labour and capital as macrfoeconomics variables?
neoclassical
1. An unemployed individual decides to spend the day fishing. The opportunity cost of fishing is equal to A) The cost of bait and any other monetary expenses. B) Zero, becaus
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