What is labor market, Macroeconomics

Assignment Help:

Q. What is Labor Market?

Labor market in the IS-LM model is the same as in cross model. Hence the IS-LM model is only applicable if profit-maximizing quantity of L would result in an aggregate supply that was larger than aggregate demand and aggregate demand will consequently determine L.

Once R and Y is determined, all the endogenous variables are concluded. The figure below demonstrates the determination of Y, R and L in IS-LM model.

1017_What is Labor Market.png

Figure: Determination of Y, R and L of the IS-LM model

We start at top to the left and extend Y* down, through the 'mirror' at the bottom left, on to production function at the bottom right and then up to the figure representing labor market. 

IS-LM is simply an extension of cross model in the sense that interest rate becomes an endogenous variable and we will be able to analyze how the interest rate is affected by changes in the economy. We could have developed IS-LM model directly, skipping the cross model as cross model adds nothing in relation to IS-LM model. The reason that most books start with cross model is entirely pedagogical. Cross model is much simpler as GDP can be determined from the goods market only as the solution to one equation one equation Yd(Y) = Y. Most students will probably find IS-LM model even more complicated had they not previously encountered cross model.


Related Discussions:- What is labor market

What do learn by study of the supply curve concepts, What do learn by study...

What do learn by study the supply curve concepts? a. The relationship in between quantity of inputs and output b. Why production is frequently subject to reducing  returns

Derivation of indifference curve, Derivation of Indifference Curve: Co...

Derivation of Indifference Curve: Consider any commodity bundle denoted by point A in the above figure which consist x 0 1  and x 0 2 amount of good I and good II respectiv

Relate overnight interest rates with interest rates, Relate overnight inte...

Relate overnight interest rates with interest rates By controlling overnight interest rates, the central bank will affect the interest rates with longer maturity. The reason f

Bonds are more attractive to investors, Briefly explain if you agree with t...

Briefly explain if you agree with the following statement: If interest rates rise, bonds become more attractive to investors, so bond prices rise. Therefore, when the interest rat

Overnight rates and interest rates with longer maturity, Q. Overnight rates...

Q. Overnight rates and interest rates with longer maturity? By controlling overnight interest rates, central bank will affect interest rates with longer maturity. Main reason f

the status of the budget balance, The following table have data for a hypo...

The following table have data for a hypothetical open economy. The amount of investment spending is unknown. Question: What is the level of private savings? Question: Wh

How we can determine the macroeconomic performance, Macroeconomic performan...

Macroeconomic performance The UK's future macroeconomic performance must be judged on how average living standards improve, inflation is kept under control, economy grows and

Firms in the circular flow, We divide all firms into 3 categories: FR inclu...

We divide all firms into 3 categories: FR includes all firms which acquire raw material (iron ore, farm products and so on), FH all those that produce semi-manufactured goods (stee

IS LM MODEL, Using the equilibrium in the labor market and the model IS-LM ...

Using the equilibrium in the labor market and the model IS-LM explain the different behavior described by the classic and keynessian schools when there is an increase in public spe

Explain herzbergs factor theory of motivation, Question 1: "Motivation ...

Question 1: "Motivation denotes to the degree of readiness of an organism to pursue some designated goal and implies the evaluation of the nature and locus of the forces, inclu

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