Aggregate expenditure and output in the short run. In principle, an economy is in equilibrium when the main macroeconomic variables tend to remain stable over time without external shocks. However, the conditions that this balance must fulfill differ according to the period in which we are analyzing the economy. In any economy, output, income, and aggregate expenditure coincide. However, this cannot be the equilibrium condition, since it is an identity. In order to be able to say that the economy has reached the equilibrium, the condition that is required is that the production and the rent are equal to the planned expenditure. The difference between planned expenditure and actual expenditure is unplanned inventory investment, which is also part of aggregate demand. Therefore, another way of defining equilibrium is that the unplanned investment in stocks equals zero. If for example, the planned aggregate expenditure was lower than the output of the companies, they would see their stocks rise above what they had anticipated. As this accumulation of inventories is computed within the total expenditure, it would be fulfilled that the GDP is equal to the demand, but the level of production would not be of equilibrium. In fact, in the following periods, the companies would adjust their production downwards to give rise to the unwanted increase in inventories. The balance would be reached when production ended up at a level equal to the planned expenditure. This example
For both scenarios, the firm’s output price and average variable cost are the same. The difference lies in the average total cost. Because the total fixed cost is significantly higher, the average total cost is also significantly higher. It would be highly recommended that the firm shut down if total fixed costs are equal to 3,000,000. In the first scenario, the firm is also losing money. We would recommend laying off ten percent of the staff (5000 employees) to account for the $400,000 loss. However, it is important to note, employee productivity must be increased to 4.44 in order to maintain the 200,000 units per day. This would allow the firm to operate in a break even state.
Imagine that you have decided to open a small ice cream stand on campus called "Ice-Campusades." You are very excited because you love ice cream (delicious!) and this is a fun way for you to apply your business and economics skills! Here is the first month's scenario--you order the same number (and the same variety) of ice creams each day from the ice cream suppliers, and your ice creams are always marked at $1.50 each. However, you notice that there are days when ice creams remain unsold but other days when there are not enough ice creams for the number of customers.
Using the data and your own economic knowledge, assess the case for financing universities mainly through charging fees to their students.
Deciding to start a business is brave and adventurous. The first step to success is a brilliant, viable, profitable idea. Whether you have decided to do it on your own because you are tired of working for someone else, or you are laid off after many years in your organization, before you decide to invest your life savings and get buried in debt, consider the big picture, the current economy, your demographic target consumer and do your research. The idea of solar energy is one such brilliant, viable idea. True the demand is present for such energy, but before taking the leap, consider the market saturation, competition, governmental rules and regulations and other determent factor that will influence the success of your
“There is no inherent reason to believe that investment outlays plus consumption outlays would always tend to equal the cost of any given output; there is no assurance that Demand would tend to equal any given Supply”
If we consider this supply and demand diagram prior to Government intervention (red line), the market leads to equilibrium price and quantity (P1, Q1) determined at the intersection of the supply (or MPC) and demand curve. Due to the
Fiscal Policy can be explained in many ways, for example. Fiscal policy is the use of the government budget to affect an economy. When the government decides on the taxes that it collects, the transfer payments it gives out, or the goods and services that it purchases, it is engaging in fiscal policy. The primary economic impact of any change in the government budget is felt by particular groups—a tax cut for families with children, for example, raises the disposable income of such families. Discussions of fiscal policy, however, usually focus on the effect of changes in the government budget on the overall economy—on such macroeconomic variables as GNP and unemployment and inflation.
What is the effect on the equilibrium price and equilibrium quantity of orange juice if the price of apple juice decreases and the wage rate paid to orange grove workers increases?
Macroeconomics showed how the increase in jobs and population affects the increase or decrease on the apartments. Equilibrium rental rate is higher than before, and the number of apartments demanded and supplied has increase
In this way, the Fed manages price inflation in the economy. So bonds affect the U.S. economy by determining interest rates. This affects the amount of liquidity. This determines how easy or difficult it is to buy things on credit, take out loans for cars, houses or education, and expand businesses. In other words, bonds affect everything in the economy. Treasury bonds impact the economy by providing extra spending money for the government and consumers. This is because Treasury bonds are essentially a loan to the government that is usually purchased by domestic consumers. However, for a variety of reasons, foreign governments have been purchasing a larger percentage of Treasury bonds, in effect providing the U.S. government with a loan. This allows the government to spend more, which stimulates the economy. Treasury bonds also help the consumer. When there is a great demand for bonds, it lowers the interest rate.
GDP consists of Gross (before taking into consideration the depreciation in the value of the product), Domestic (within the borders of a country) and Product which simply means a good or service. So what does it all mean when all these three factors are interlinked? GDP is simply the market value of all the final goods and services produced within a country in a given time period – usually a year (Parkin et al. 2005: 438).
The purpose of this report is to analyze the opportunity to produce plastic components for cartridge production and choose the best alternative. It is predicted that the annual demand growth is a triangular distribution with a minimum of 5%, most likely of 17% and a maximum of 25%. Due to the continuous growth in the demand, the alternatives cannot be compared using just the data for 2010. An analysis is carried out for the time period 2011 to 2015 and the present worth of the net income is considered as the criteria to select the alternative. The analysis basically can be divided into 5 steps:
Carbaugh (2011) asks, "Can the United States Continue to Run Current Account Deficits Indefinitely?" (p. 361). Ultimately in the long term the answer is no, but the question could be rephrased to ask: (1) Does the United States' unique position in the world economy allow the country to safely run persistent external deficits? and (2) can persistent U.S. deficits in the current and payments accounts be adjusted without bringing about economic recession or crisis? Japan, China, and Middle Eastern oil countries have enabled this deficit to continue by heavily investing in U.S. Treasury securities (Carbaugh, 2011). Because foreigners desire to purchase American assets, Carbaugh (2011) concludes that “there is no economic reason why [the
Economic growth refers to the rate of increase in the total production of goods and services within an economy. Economic growth increases the productivity capacity of an economy, thereby allowing more wants to be satisfied. A growing economy increases employment opportunities, stimulates business enterprise and innovation. A sustained economic growth is fundamental to any nation wishing to raise its standard of living and provide a greater well being for all. Gross domestic product (GDP) is the monetary value of all final goods and services produced over a year. It is the total value of production within the economy. The total value of production is the total value of the final goods or services less the cost of
1.) Productivity is defined as the relationship between resources used and results achieved¹. Improvement in this area means either obtaining more and better program output from a given level of resources or using fewer resources to maintain or improve a certain level of output. The federal government has a vital stake in improving the productivity of state and local governments for two primary reasons: (1) the national economy is strengthened as a result of improvements in the productivity and fiscal prospects of this key sector; and (2) the effectiveness and efficiency of the multitude of federal grant and regulatory programs using state and local governments to implement federal policies are directly related to the management capacity