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This problem revolves around determining the LM curve, as we did earlier in the term such that money demand (M D ) equals money supply (M S ), however in this instance under differ
Q. What do you mean by Price index? Because we are only interested in percentage change of the price level and not particular value, we can divide every price level by a given
Q. Equilibrium in the labor market? Equilibrium in the labor market Real wage W/P will be equal to the equilibrium real wage in the classical model
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.
What is average cost in the producing output? Average total cost , frequently considered as to simply average cost, is sum of total cost divided through quantity of output gen
Q. State the Marginal Productivity Theory. What are its features and assumption? Marginal Productivity Theory of distribution states that in a capitalist economy the demand for
Subsidy programs are likely to have a number of secondary effects in addition to the direct effect on dairy prices. What impact do you suppose farm subsidies are likely to have on
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
Q. Explain the classical growth theory? Production function won't provide us with a theory or explanation of growth. It's only a convenient tool that helps us breaking down gro
Determinants of Money Supply The preceding sections concentrate on the processes through which the commercial banking system creates and destroys deposits by purchasing and se
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