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Suppose the economy is in a position where equilibrium output is below the potential of the economy to produce. Discuss the ways this may manifest itself.
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Suppose the economy is in a position where equilibrium output is below the potential of the economy to produce. Discuss the ways this may manifest itself. In the simple Keynesian model, suggest a plan of action for the government to remedy the situation. In this simple model, what would be the consequences of a government imposed wage freeze? The primary measure of a nation's overall level of economic activity is the value of its production of goods and services, called the national product/income/output or expenditure. To measure total output, money values of the variety of goods and services are aggregated. There are two different measures of output being 'real' and 'nominal' values, where real national output is the change in national output if prices remain unchanged - that is what we are interested in. Equilibrium output is where supply equals demand, or where planned expenditure equals output. The potential of an...
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