Aggregate supply

Unfortunately, her diary is left unfinished, for she, her family, and the other occupants of the annex are discovered by the Gestapo and sent to a concentration camp. The general horror of war, coupled with the specific horrors that the Nazis inflicted upon the Jews, is the major theme of the diary. Anne Frank, the young teenage girl who writes the diary, experiences the pain of war first-hand. In order to try and escape the Nazi extermination of Jewish people, her family and the Van…

2016) It is a model that implies that an economy is self-regulating and that the supply of goods is proof of their demand. It is based on the idea that the market is always at, or near, real GDP and that the market itself will work to bring the economy back to the real level of GDP when it variates from the said level. One of the basic components of the Classical Model is Say’s Law. J.B. Say stated that supply is what created its own demand. It is the idea that if something is produced…

Supply shock refers to a sudden, unexpected event that changes the supply of a product, commodity or service. This results in a sudden change in its price and either increases or diminishes its supply. Contemporary economic theory explains that a supply shock creates a material shift in the aggregate supply curve and thus forces prices to find a new balance. Supply shock can be positive where there is an increased supply or negative when supply is decreased. Its effects can be either long…

to illustrate how one goes about constructing dynamic, stochastic general equilibrium models to shed light on questions of substantive economic interest. In order to test the proposition that where nominal aggregate demand shocks are highly volatile the effect of any particular nominal aggregate demand shock is less, Lucas got data on nominal and real output/ expenditure covering the years 1951-1967 for 18 countries. He then assumed that, for each country, the mean value of the growth in their…

employment level, meaning that all resources are most fully employed in the economy. A short run tradeoff between unemployment is better than inflation. To begin with “An expansionary policy is a macroeconomic policy that seeks to expand the money supply to encourage economic growth or combat inflation (price increases’. “Inflation is an increase in the overall level of prices in the economy.pg.14” if unemployment decrease that means more people would have jobs, more employed works means more…

2006). As a consequence, the aggregate exports demanded by other countries may reduce significantly. In the long run, the imports may exceed the exports (Suranovic, 2005). It is worth noting that in such circumstances, local firms suffer the most. Therefore, firms will be forced to reduce their prices or cut down their levels of…

13 The Concept of Money supply According Layi (1999) money supply means the amount of money which is available in an economy in sufficiently liquid and spendable form. What constitute the components of this money supply depends on what has been officially accepted by monetary authorities of each country as the constituents of money supply for that country. Thus, each country‟s money supply definition may be unique. According to him the narrowest definition of money supply in modern time is…

monetary policy can be effective, but there are additional efficient ways in solving this matter. The two main strategies for reducing unemployment are demand side policies and supply side policies. Demand side policies reduce demand-deficient unemployment, unemployment caused by a recession. On the other hand, supply side policies reduce structural unemployment, the natural rate of unemployment. (Pettinger, 2011) Demand side policies are significant when a recession occurs and there is a…

optimum. Externalities can take many forms. For policy purposes four more significant characteristics can be recognized. First to mention are pecuniary and technological externalities. Whereas pecuniary externalities operating through simple demand supply principle and do no require any government intervention, technological externalities are the exact opposite. Technological externalities directly affect consumers and producers and the market does not account them for. Equally important…

affected by monetary and fiscal policy in regard to real income and the increase in spending. Monetary policy affects the way society spends when the Federal Reserve regulates the amount of money in circulation. The Federal Reserve controls the money supply by the interest rates offered to banks. Therefore, more money is borrowed by the banks at lower interest rates which means more money will be in circulation. In contrast, higher interest rates yield less money circulation in the economy.…