Give the basic symbolic equations for the mainstream view of the economy. Identify each symbol in the equation with a brief explanation. Using this equation, what is one major explanation for instability in the economy from a mainstream perspective?
What will be an ideal response?
The basic equation for the mainstream theory is the aggregate expenditures equation: C + Ig + Xn + G = GDP where C is aggregate consumption, Ig is gross investment spending, Xn stands for net exports (exports minus imports), and G is government spending on goods and services. The instability in the economy arises from the instability in investment spending. The sharp increases or decreases in investment spending lead to changes in aggregate demand that result in demand-pull inflation or recession.
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Government controls of price, output, entry of new firms, and quality of service in industries where monopoly appears desirable are known as
a. antitrust regulation b. economic regulation c. social regulation d. antimerger regulation e. consumer advocacy regulation
For a firm in a perfectly competitive market, the price of the good is always
a. equal to marginal revenue. b. equal to total revenue. c. greater than average revenue. d. equal to the firm's efficient scale of output.
Figure 3-3
In , if the initial demand for margarine were D1, the impact of a decrease in the price of butter, a substitute good for margarine, would be illustrated as
a.
a shift in the demand curve to D2.
b.
a shift in the demand curve to D3.
c.
a movement downward to the right along the original demand curve D1.
d.
none of the above.
Taxable income" is
A. total income less deductions and exemptions. B. earned income less property income. C. all income other than wages and salaries. D. wage and salary income only.