Illustrate the says law, Macroeconomics

Assignment Help:

Q. Illustrate the Says Law?

With Say's Law, aggregate demand would always be equal to aggregate supply and cross model would be incorrect. 

Keynes's argument as to why Say's Law doesn't apply can be explained in the cross model. According to Say's law, supply creates its own demand. When supply increases, income increases and a higher income creates an equally large increase in demand. Firms and households are stimulated to a higher demand by cuts in real interest rates. Higher aggregate supply will lower the real interest rate and investment and consumption will increase. According to Say's Law, r will fall to the level where total increase in C and I is exactly as large as increase in aggregate supply.

According to Keynes and cross model, this won't happen. When Y increases, C will increase however not as much as Y (and I will not change at all). Aggregate demand won't increase as much as aggregate supply and Say's Law will fail.


Related Discussions:- Illustrate the says law

Dynamic muliplier, distinguish between state and dynamic multiplier and ill...

distinguish between state and dynamic multiplier and illusrate balanc budget theorm in hindi

Using algebra find the equilibrium price, The demand equation for champagne...

The demand equation for champagne is given by P = 10 - Q. The supply schedule for champagne is given by P = Q. Note that P denotes price per bottle in dollars, and Q is quantity me

Is-lm approach, with help of is-lm technique explain the process of integra...

with help of is-lm technique explain the process of integration of money market and goods market by way of keynesian approach

Calculating a country''s balance of payments, Which of the following is con...

Which of the following is considered when calculating a country's balance of payments? Military expenditures state unemployment domestic inflation rates foreign inflation rates.

Stock trading company, An online stock trading company makes part of their ...

An online stock trading company makes part of their revenue from clients when the clients trade stocks therefore, it is important to the company to have an good idea of how many tr

Application of revealed preference approach, Application of Revealed Prefer...

Application of Revealed Preference Approach It has been strongly argued, especially by Sir John Hicks, that one major advantage of revealed preference theory is that it is expl

Economics, Consider the following: The city council has just approved the c...

Consider the following: The city council has just approved the construction of a water park in your town. You are responsible for studying the impact of the new water park on the l

BALANCE OF PAYMENTS, explain any two factors that cause the shifts in the b...

explain any two factors that cause the shifts in the balance of payments curve.

The effect of market for milk, 1a. Show on the market for milk the effect o...

1a. Show on the market for milk the effect of the introduction of BGH (bovine growth hormone). 1b. Show on the market for cheese the impact of what happened in the milk market.

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