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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.
The opportunity costs associated with the use of resources owned by a firm are: a. externalities b. implicit costs c. explicit costs d. sunk costs
Thread less is an example of a firm building on its customer base to use new products and also to participate in the design and vetting of popular designs. In the summer of 2010, D
it has been argued that economic development of developing countries has been held back by a persistent fall in the terms of trade of developing countries over the long run
In 2007, the potato chip industry in the Northwest was competitively structured and in long-run competitive equilibrium; firms were earning a normal rate of return and were competi
Determination of L in the cross model As firms will produce less than Y OPT , they require less labor than L OPT . We can determine exactly how much L they need in order to pro
The problem with the Keynesian model We can classify two problems with the Keynesian model as developed so far: 1. Π is exogenous. Although inflation may temporarily deviate
Explain why P=MC in the short-run equilibrium of the perfectly competitive firm, whereas in the long-run equilibrium P=MC=AC.
suppose that a persons wealth is kshs. 50,000 and her yearly income is kshs. 60,000. suppose further that her money demand function is given by Md = y(0.35-i) where i= interest
In the long run A. price and output levels are mutually dependent. B. the level of output depends on the price level. C. the level of output is independent of the price level.
The events X and Y are mutually exclusive. Suppose P(X)=.05 and P(Y) =.02. What is the probability of either X or Y occurring? What is not probability of X nor Y happens?
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