Download e-book for iPad: Advanced Macroeconomics by Sanjay Rode

By Sanjay Rode

ISBN-10: 8740301567

ISBN-13: 9788740301564

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Extra resources for Advanced Macroeconomics

Example text

In the figure, interest rate increases from I to I1. The increase in income was expected Y1 but income increases up to Y2. The crowding out occurs in the expansionary fiscal policy. It is shown as Y1 to Y2. The increase in interest rate wipes out the increase in total income. Therefore, again at higher level of income and higher interest rate, industrialists do not find it easy to invest money and their investment in firms starts declining. As the investment declines the employment generation in the economy also starts declining.

Money is used in regular transactions all over the world. 6. Scarcity Money is scarce and it is not easily available. In order to get the money, person has to take debt, borrow or work for it. Farmers have to produce commodities in their farm. Industries must do the business. Money cannot be transferred easily from one person to another. The scarcity factor forces money to be used wisely because it has alternative uses. If the money is cheap and it is easily available then the monetary authority decides to reduce its supply through monetary policy and instruments.

It means it is a combination of Keynesian and Classical supply curve. 20 displays that the aggregate demand and supply intersect at point E. It is an equilibrium point with price P* and aggregate income Y*. At equilibrium point, price and income is equilibrium. If the aggregate demand increases then the prices increases. Turning a challenge into a learning curve. Just another day at the office for a high performer. Please click the advert Accenture Boot Camp – your toughest test yet Choose Accenture for a career where the variety of opportunities and challenges allows you to make a difference every day.

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Advanced Macroeconomics by Sanjay Rode


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