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!
Q. What is IS-LM model with inflation?
The IS-LM model with inflation
The basic assumption
We developed IS-LM model with constant wages and prices. We can now extend this model to allow for inflation. Rather than constant wages and prices, we should presume that π = πW = πe. In the same that we dropped assumption of constant P when we went on to AS-AD model to allow for changes in real wages, we will drop assumption that π = πW to allow for inflation and changing real wages.
Let's briefly justify the assumption π = πW = πe. πW = πe may be illustrated by realizing that if workers expect 6% inflation, they will demand 6% wage increases to sustain the same real wage (they typically require more than 6% and an increase in real wages though this is since the growth of the economy will allow for this - always think of these models as if there is no growth).
Assumption π = πW means that we have a balanced inflation. Since in IS-LM model, the real wage is then constant. This is a reasonable assumption if economy is in a state where aggregate demand is inadequate and L is lower than profit-maximizing level.
WHAT IT MEAN
Example of Introducing the Government- ACCOUNTING SYSTEM So far there was no government in any of our stylized economies. Let us now introduce it. To begin with, our governmen
Two people are engaged in a joint project. If each person i puts in the effort x i , the outcome of the project is worth f ( x 1, x 2). Each person's effort level x i is a
At first, it may seem obvious that consumption will rely on Y. If GDP is doubled in real terms over a number of years, government consumption, private consumption and investment wi
Bread is a related good to peanut butter: show on the graph of the market for peanut butter, the impact on the price and quantity from an increase in the price of bread.
Loretta liver more labs purchased R&D equipment costing $200000.00 The interest rate is 5%,salvage value is 20000.00 and the expected life is 10 years. Compute the PW of the deprec
Consider a hospital that produces output (Q) and has two production inputs, nurse-hours (N) and beds (B). the hospital faces input costs of W N = 15 and W B = 25. Assume the h
Q. Explain about Price Inflation? The major reason for allowing for non-constant wages in the model is that we then can allow for persistent deflation/inflation. With constant
Can you think of examples where the government does not intervene enough when it comes to consumer safety and product information? Examples where too much intervention is the case
Monetary Policy Vs. Fiscal Policy According to monetarists, money is very important in determining the level of aggregate demand and that monetary policy is very potent. In con
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