Define the term - bliss point, Business Law and Ethics

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Define the term - bliss point

A country's bliss point is the outcome of monetary growth rates that gives that country its highest possible level of welfare. The bliss point for the domestic country is at point B. This is above the 45 degree line, implying that ideally it desires the other country to have the faster rate of monetary expansion. This will secure the desired balance of payments surplus for the home nation. Similarly the bliss point for the foreign nation is at point B1. This is below the 45 degree line, again because it desires that the other country have the faster rate of monetary expansion. The further away each country is from its own bliss point the lower its economic welfare. Each country's set of indifference curves are therefore concentric around its bliss point. A number of these are shown in Figure below. With each nation ignoring the spillover effects associated with its own monetary policy we would expect this situation to lead to Pareto inefficiency.


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