Determination of all the variables in the classical model, Macroeconomics

The below diagram demonstrates how all the variables are determined in classical model: 

465_Determination of all the variables in the classical model.png

Figure: Determination of all the variables in the classical model

a) Start at the top right. Here we determine real wage W/P and L. 

b) Follow L down to the point on production function in middle to the right. Here you can find real GDP. 

c) Follow GDP to left to the graph of the left in middle. This graph contains a single 45-degree line. All points on a 45-degree line have the same x, y coordinates. Such graph is used to transform a variable from y axis to the x axis. 

d) Follow Y up to top left graph. In this graph you find aggregate supply that is independent of P and aggregate demand that is just the quantity theory of money. From this graph, you get up P. 

e) If you multiply P from upper left-hand chart, by W/P from upper right-hand chart, you would get nominal wage W. 

f) Follow Y from middle left graph down to bottom left graph. Here is S (r) and I (r) and a determination of real r and I in the balance. In C + + NX + G = Y, and because NX and G is exogenous, we can calculate C.

Posted Date: 8/14/2013 2:33:18 AM | Location : United States







Related Discussions:- Determination of all the variables in the classical model, Assignment Help, Ask Question on Determination of all the variables in the classical model, Get Answer, Expert's Help, Determination of all the variables in the classical model Discussions

Write discussion on Determination of all the variables in the classical model
Your posts are moderated
Related Questions
how would you describe a neo-keynesian (or neoclassical) synthesis? and why did Joan Robinson label it "bastard Keynesian"

distnguish betweenNational income at market price and National Income at factor cost, explain the importance of the distinction

Read "How Did Economists Get It So Wrong" by Paul Krugman and second, the blog "History of Economics Playground", by Pedro Duarte, Tiago Mata, Clement Levallois, Yann Grd...etc., t

In a sample of 80 people who have had strokes, the average cholesterol level was 250 with a standard deviation of 70. In order to test the hypothesis (at the 5% level of significan

If real GDP was $13.1 trillion in 2013 and $13.3 in 2014, what is the growth rate? (b) How many years would it take for GDP (gross domestic product) to double (using your answer fr

Explain the adjustment to the new equilibrium price from an increase in supply.

using a graph of the classical labour market,illustrate the effects of a real wage existing in the market that is lower than the equilibrium real wage.what will eventually happen i

There are many ways to measure the national income. a) List at least 5 of themk question #Minimum 100 words accepted#

The following is the information from the national income accounts for a hypothetical country: GDP

The total demand (marginal benefit) curve for visiting the Great Barrier Reef is as follows: Price = 5000+100*Fish Biomass (tons per square mile) -10*Number of Trips. a. Does th