Core Macroeconomic Models: IS-LM-PC, Phillips Curve, and Key Laws
The natural rate of unemployment is a function of the firm’s markup and non-labour related cost, 𝑚, the labour market characteristics, 𝑧, and the strength of the effect of unemployment on wages, alpha–> un=(m+z)/alpha Y EXPLICAMOS EL CAMBIO
Potential output,Yn, is a function of the natural employment level, Nn, which depends on the natural rate of unemployment: Yn=Nn=L(1-un)Y EXPLICAMOS EL CAMBIO
b) Analyse the policy’s short-run effects. SOLUTION: Initially, the economy is in equilibrium
Read MoreMoney Market Instruments: Characteristics and Function
The term “Money Market” is somewhat of a misnomer. Currency itself is not traded; rather, the securities in the money markets are short-term with high liquidity, making them close substitutes for money.
Money Markets Defined
Key characteristics of money market securities include:
- Usually sold in large denominations (e.g., $1,000,000 or more).
- Low default risk.
- Mature in one year or less from their issue date, though most mature in less than 120 days.
Money Markets Versus Banks
The banking industry
Read MorePublic Enterprises in India: Evolution, Reforms, and Models
Rationale and Evolution of Public Enterprises
Question 1: Discuss the rationale and evolution of Public Enterprises in India since independence.
Answer:
Public Enterprises (PEs) in India, also known as Public Sector Undertakings (PSUs), were established with specific rationales that evolved over different phases since independence.
Rationale for Public Enterprises
- Socialistic Pattern of Society: Inspired by the Nehru-Mahalanobis model, PEs were seen as instruments for achieving a socialist society with
Law 19983 on
A) Business:Business is an economic activity of producing and selling goods or services to earn profit.B) Demand:
Demand is the quantity of a good or service that consumers are willing and able to buy at a given price and time.C) Inflation:Inflation is the continuous rise in the general price level of goods and services in an economy.D) National Income:National income is the total money value of all final goods and services produced in a country during a year.E) Law of Demand:Law of demand states
Read MoreOpportunity Cost and Production Possibility Frontier
Opportunity cost, or alternative cost, refers to the cost of investing available resources into one economic opportunity at the expense of other available alternatives. It represents the best unrealized value.
The Production Possibility Frontier (PPF)
The Production Possibility Frontier (PPF) is the set of combinations of productive factors or technologies that reach peak production. It reflects the maximum quantities of goods and services that a company can produce in a given period using specific
Read MoreKeynesian Multiplier and Fiscal Policy Effects
Keynesian Multiplier and Demand Changes
The idea of compensating changes in private demand with changes in public expenditure rests on the Keynesian Multiplier. An increase in public spending increases domestic production and, consequently, agents’ disposable income. In turn, these increased incomes finance consumer demand and investment, leading to a further increase in production, which generates more income, and so on.
Multiplier Conclusions
Conclusion 1: Haavelmo Theorem
An increase in government
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