" next best alternative product or service that has been sacrificed and forgone "
Saturday, June 9, 2018
Production Possibility Curve or Production Transformation Curve or Production Possibility Frontier is a statistical device used to indicate economic problems like allocation of resources, efficiency of production and distribution and growth.
" a graph plotted by joining various combinations of two goods that can be produced by an economy fully utilising available resources and technology".
Friday, June 8, 2018
Marginal Opportunity Cost is defined as the amount of one good that needs to be given up or sacrificed in order to increase the production of the other good by one unit or the change occurred in another product when an additional unit of first product is made.
Monday, February 19, 2018
Assume that monetary base is increased by open market operations. Gour expenditure excluding interest payments and tax rake remain unchanged so the B B line does not shift until nominal income starts to change.
However, as with physical policy , long run conclusions of this model differ from Keynesian ones because money wages adjust to price changes. In this instance, since the price level has fallen, money wages fall and as A s schedule would shift down to the right. The reduction in the stock of bonds would then rise asset prices and lower rate of return. Consequently the capital stock is increased- In long run equi output per unit of labour has risen and the price level has fallen.
Thursday, February 8, 2018
Brunner and Melt zer's main quarrel with the IS LM model is that it has a very restricted range of assets, money and bonds. They also Concentrate on stock adjustment rather than flow adjustment as in the ISLM model. A further difference is their specification of the aggregate supply function. In the short run money wages are fixed and outpUt rises with Inareases in the price level .In the long run money wages adjust to price changes, causing the short run aggregate supply function to shift.
Brunner and Meltzer illustrate their mathematical model by means of usual aggregate demand and supply function. Aggregate demand consists of govt expenditure and private sector demand, Which depends on the various interest rates, price level and wealth This includes the govt budget constraint. The govt budget is balanced along line B B . as Tax revenues rise with nominal income a lower_ combined with some higher price level- budget balance to the right of B B- and to the left a deficit- changes because interest payments varying- to the outstanding stock of govt bonds- will be changing as income changes and- budget imbalance.
Physical Policy in Brummer- Meltzer model'
In initial steady state equilibriumm at point E. An increase in govt expenditure financed by some constant proportion of bonds to money expenditure shifts ADo to AD, The budget is deficit so that B B line also shift right to B BI, This is short run equilibrium at point such as F where AD is temporarily equal to AS. Point F is only a short run equilibrium point because the govt budget is in deficit. This ensure that there are further wealth effects which cause AD to continue shifting upwards. Once the budget is balanced some point such as G is attained.
Wednesday, October 25, 2017
Tuesday, February 14, 2012