Statics and dynamics, Macroeconomics

 

Statics and Dynamics 

Economic models deal with stock and flow variables. These variables can be in one of the two states - equilibrium or disequilibrium - at a particular point in time. If the variables are in the equilibrium state and tend to repeat themselves from one time period to another, we have the case of "stationary equilibrium". If the variables are in a state of disequilibrium, in all likelihood they would have different values in the next time period.Models which do not consider explicitly the behavior of variables from one time period to another are called 'Static' models. In static models, the variables do not have time dimension. Because these models do not consider the passage of time, they cannot explain the process of change. Static models indicate the values of variables for a given time period but cannot indicate what their values will be in the next period. At the most they can only indicate the direction of change. In contrast, dynamic models consider explicitly the movement of variables over different time periods. What happens in one time period is related to what happened in the preceding time periods and what is expected to happen in the succeeding periods. In other words, variables in dynamic models are said to be 'dated'. These models indicate the movement of variables from one disequilibrium position to another, until the variables ultimately reach the equilibrium position.

Posted Date: 9/11/2012 5:08:37 AM | Location : United States







Related Discussions:- Statics and dynamics, Assignment Help, Ask Question on Statics and dynamics, Get Answer, Expert's Help, Statics and dynamics Discussions

Write discussion on Statics and dynamics
Your posts are moderated
Related Questions
The _______________ illustrates the notion of opportunity cost. If an economy is fully utilizing its resources, it can produce more of one product only if it produces less of anoth

Index number formulas

Assume two individuals, A and B, are considering marriage, and each face the same amount of hours a week to be split between market-labor and home-labor.  Assume that A can make $2

Consider the economic data for Country A: Unemployment level of 15% Natural Rate of Unemployment is 6%. Required Reserves is 25% C = 50 + 0.75Y; I = 600; G = 250 (note: T = 200 for

More than ever, groups and teams are responsible for executing tasks in the workplace. Take a position on the following statement: All organizations should use the group structure

what is a limitation of nation income

Buying government securities: When a commercial bank buys government bonds, the effect is substantially the same as that of lending - new money is created. To

In a particular month, the labor force is 130 million, there are 9.1 million unemployed workers, the job -losing rate is 3% per month, and the job-finding rate is 40% per month. Ho

Export Promotion Measures: While a number of  existing  export promotion schemes  such as  incentive related to Duty Free Replenishment Certificate (DFRC), Duty Entitlement Pa

Q. Explain the problem involved in consumer price Index? To explain the problems involved in calculating CPI we consider MP3 players. If you measure the average price of MP3 pl