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!
At first, Say's Law may seem 'obvious'. Though, it's not - actually, it's highly controversial. The reason it may seem obvious is that you have perhaps learned from microeconomics that in equilibrium, demand is equal to supply. If you're outside equilibrium, prices will adjust and you shall be taken back to equilibrium.
This isn't the motivation behind Say's Law which isn't an equilibrium condition. In the classical model, YS and YD are real variables which don't depend on the price level. This may strike you as odd. YS relies only directly on L and K and indirectly on the real wage. If price level increases in the classical model, wage level will increase by the same amount leaving the real wage unchanged. As for aggregate demand, if price level and wage level both increase (by the same amount), there is actually no change for the consumers. If all prices double whereas you income doubles, there is no need to adjust you demand.
The justification for Say's Law isn't as an equilibrium condition through price adjustments. No price adjustment in the world would equilibrate aggregate demand and aggregate supply in the classical model. In its place, justification is based on income effects instead of on price effects: higher supply Þ higher income Þ higher demand.
The reason why Say's law is so controversial is following. Assume that investors and consumers fear that the economy will slow down. They may then decide to save a substantial part of their income and aggregate demand may not be equal to aggregate supply.
how large money is supply (M1)
You are the manager of a firm that receives revenues of $40,000 per year from product X and $90,000 per year from product Y. The own price elasticity of demand for product X is -1.
Money Supply and Monetary Policy All modern societies use money as the medium of exchange. Since money can be exchanged for goods and services it also becomes a financial asse
When investment banks underwrite IPOs, they are typically sell stock for 5-10 percent more than they pay for it. When they underwrite stock for companies that are already public, t
In general, economists have found that as nations' levels of per capita real Gross Domestic Product (GDP) increase, A. the rate of population growth declines. B. the rate of
Q. Relationship between number of hours worked and unemployment? In all models we presume a negative relationship between number of hours worked and unemployment. If number of
Define the monopoly of Central banks The central bank has a monopoly on issuing currency, it is in complete control of the monetary base. In section 7.4.2 we will describe exac
Singer suggests that although the right to sell blood does not threaten the formal right to give blood, it is incompatible with "the right to give blood, which cannot be bought, wh
Derive the conditions for steady state in the Solow model. What are its implications? In what respects is the golden rule different from the steady state?
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
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