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!
Q. Why GDP is determined only by aggregate demand?
Note that we haven't said anything about the aggregate supply so far. In order to justify why GDP is determined only by aggregate demand we have to explain why supply aggregate YS plays no role and why YS always would be exactly equal to YD (that is essential for the goods market to be in equilibrium).
We can explain why YS = Y* by analysing what would have happened if firms didn't supply this quantity.
1. Imagine that firms supplied and also produced a larger quantity so that Y > Y*.
2. From the figure above, YD< Y and firms can't sell everything they produce.
3. Unplanned stock investments will increase by Y - YD when companies are forced to put unsold products in stock.
4. Then firms will want to lower their supply. Reduction will continue until YS = Y*.
5. If, conversely they supply and produce too little, Y < Y* and then Yd> Y. Stocks will now be decreased and firms will want to increase the supply.
Please note that Keynesian model always presumes quantity adjustment to get back to equilibrium. There are no price adjustments in the Keynesian model.
the circular flow of income in an governed economy
what are some internal market forces and how is the outcome of output, jobs, prices, growth, and international balance
Financial Development A well developed financial system is very essential for the smooth functioning of any economy. One set of important statistical indicators that is used to
Explain determination of national income using aggregate demand-aggregate supply and saving-investment methods for a three sector economy.
How will a fall in domestic investment affect the trade surplus and net capital outflows in the domestic economy, the trade deficit and capital inflows in the rest of the world, in
How is economics works with interaction of individual choices? Principles behind the interaction of individual choices: 1. There are gains through trade. • Specialization
In 1999 Mercedes-Benz USA adopted a new pricing policy, which it called NFP (negotiation-free process), that sought to eliminate price negotiations between customers and new-car de
ACCOUNTING SYSTEM-EXAMPLE III Now suppose the Jam Co. manufactures some herbal chemicals and flavors which it sells partly to Extracts Co., partly to Bottling Co., some are co
Summary of the cross model The below list summarizes the cross model and associates it to classical model: Labor Market: Real wages W/P is exogenous in cross model
The Transmission Mechanism The mechanism by which the changes in monetary policy affect aggregate demand is called 'transmission mechanism'. Two stages in transmission mechanis
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