Aggregate production function, Macroeconomics

Assignment Help:

The aggregate production function

Definition

Imagine the national economy during a short period of time (say one week). We refer: 

  • L: total amount of work used during this period (by all individuals in the economy).
  • K: total amount of capital used.
  • Y: total amount of finished goods produced during this period (real).

It is still the case that Y and L are flows whereas K is a stock. During a short period of time, we can presume that amount of capital is constant. 

Aggregate production function, or simply production function is a function which relates L, K and Y. Precisely, we presume that Y is a function of L and K: 

Y = f (L, K)

In most cases, we won't specify exactly what the function f looks like. Though we always presume that f is increasing in L and K, which is, when we use more labour and/or more capital, we would produce more goods.


Related Discussions:- Aggregate production function

Benefits and disadvantages of each scenario, Do you think that public admin...

Do you think that public administrators should be restricted to only laid down rules in the discharge of their duties as espoused by Max Weber or should they have some amount of di

Var table, From estimating the aforementioned unrestricted VAR, a table of ...

From estimating the aforementioned unrestricted VAR, a table of coefficient and statistics will be produced. From this table, certain statistical information can be analysed, such

Determine the term- nominal wages, Determine the term- Nominal wages Th...

Determine the term- Nominal wages The nominal wage is wage per unit of time in currency used in the country- what we mainly just call wage. When we refer to wage in macroeconom

#title., it has been argued that economic development of developing countri...

it has been argued that economic development of developing countries has been held back by a persistent fall in the terms of trade of developing countries over the long run

Happens with the budget constraint, Suppose that Ana is buying only 2 goods...

Suppose that Ana is buying only 2 goods: good 1 and 2. If the price of good 1 doubles and the price of good 2 drops by one third, then what happens with the budget constraint? (Ass

What are the advantages of capitalism, The benefits of capitalism are that ...

The benefits of capitalism are that the governments have limited control over other business, which lets business compete.

How unemployement increases by firm relocating production, How unemployemen...

How unemployement increases by firm relocating production If unemployment increases in a specific city because of a firm relocating production, it's structural unemployment tha

Cost of raw materials annually, If you have $10,000 to start a lawn-cutting...

If you have $10,000 to start a lawn-cutting business, the interest rate is 6 percent, your annual cost of raw materials are $4,000, and the earnings you sacrifice from working at a

Money, what effect would a rise in the velocity of money have on output, em...

what effect would a rise in the velocity of money have on output, employment and price level?

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd