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Q. Explain Reversed Say's Law?
In the cross model, supply should instead follow demand. Cross model not only rejects Say's Law, it turns it entirely upside down. In the cross model 'demand creates its own supply'.
Just as Say's Law is criticized by many economists, there is criticism of this reversed form of Say's Law. Firms passively produce exactly what consumers want. If there is an increase in demand, firms would just produce this extra quantity. Motivation for this behaviour by the firms is further analysed when we describe the labor market in the cross model.
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Q. What is Labor Market? Labor market in the IS-LM model is the same as in cross model. Hence the IS-LM model is only applicable if profit-maximizing quantity of L would result
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#question.Q8. In 1961, Germany faced the dilemma of an external surplus and a booming economy. As a result, speculative capital flowed into Germany and the Germans felt obliged to
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