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We can be sure this setup gives us the equilibrium levels as neither firm has an incentive to change their level of output as doing so will harm the firm at the benefit of their rival. Now substituting in q ∗ {\displaystyle q^{*}} for q 1 , q 2 {\displaystyle q_{1},q_{2}} and solving we obtain the symmetric (same for each firm) output ...
The Keynesian cross diagram is a formulation of the central ideas in Keynes' General Theory of Employment, Interest and Money.It first appeared as a central component of macroeconomic theory as it was taught by Paul Samuelson in his textbook, Economics: An Introductory Analysis.
In dynamic equilibrium, output and the physical capital stock also grow at that same rate, with output per worker and the capital stock per worker unchanging. Similarly, in models of inflation a dynamic equilibrium would involve the price level , the nominal money supply , nominal wage rates , and all other nominal values growing at a single ...
The conditional portion of this phrase refers to the fact that this function is conditional on a given level of output, so output is one argument of the function. Typically this concept arises in a long run context in which both labor and capital usage are choosable by the firm, so a single optimization gives rise to conditional factor demands ...
Starting from one point on the aggregate demand curve, at a particular price level and a quantity of aggregate demand implied by the IS–LM model for that price level, if one considers a higher potential price level, in the IS–LM model the real money supply M/P will be lower and hence the LM curve will be shifted higher, leading to lower ...
The structure of the input–output model has been incorporated into national accounting in many developed countries, and as such can be used to calculate important measures such as national GDP. Input–output economics has been used to study regional economies within a nation, and as a tool for national and regional economic planning.
The calculation for the output gap is (Y–Y*)/Y* where Y is actual output and Y* is potential output. If this calculation yields a positive number it is called an inflationary gap and indicates the growth of aggregate demand is outpacing the growth of aggregate supply—possibly creating inflation; if the calculation yields a negative number it is called a recessionary gap—possibly ...
The firm which produces at this output level is said to maximize profits. If the output produced is less than the equilibrium quantity (), as shown in the red part, then is greater than (>), and the profit is not maximized. The firm has in its interest to raise its output level to maximize profits, because the revenue gained will be more than ...