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Questions tagged [aggregate-production]

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Economic interpretation of a CES production function

I am following a paper where a production function of this type is used. $$Y=\left [\beta K^{- \rho}+\alpha \eta \left (\frac{K}{L} \right )^{-c(1+\rho)}L^{- \rho} \right ]^{-1/\rho}$$ It is a ...
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Supply elasticity on a piece-wise linear supply function

The supply elasticity at a point is the willingness to produce more or less after the price has changed (due to whatever reason?). $$\mu_{Q,P}=\frac{\partial Q_S/Q_S}{\partial P/P}=\frac{\partial Q_S}...
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How is Aggregate Supply(Willing) equal to National Income(Actual)?

Acc. to definition of Aggregate Supply It is the total value of final goods and services that the producers are willing to supply in country . Definition of National Income It is the value of ...
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1answer
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How is employment related to aggregate demand and aggregate supply?

When we talk about excess or deficient aggregate demand , how does employment suddenly comes ?
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1answer
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Why doesn't Aggregate Demand mean National Income whereas Aggregate supply is equal to national income?

Aggregate Demand is Basically $$ AD = C + I + G + X - M $$ Is not this national income Through Expenditure Method ? Then why don't we treat AD equal to National Income ?
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Can Autonomous Consumption be Greater than Income of individual?

Autonomous consumption is done either through past savings or by borrowing money or selling asset to have minimum consumption in order to survive. So can autonomous consumption be greater than our ...
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Why can't saving be equal to income?

A person can save all his income , right ? Then why can't saving be equal to income ? In the context of aggregate demand and supply .
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1answer
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Why don't we draw National Income Curve(45 deg. line) simultaneously with graph for Saving Function?

When we talk about Consumption Function , we draw the 45 degree line of Income or Aggregate supply curve simultaneously. But while graphing saving function , we don't show Income curve (45 deg. line) ...
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1answer
39 views

Short run Aggregate supply curve is horizontal or positively sloped?

I want to understand the adjustment process from Very short run production decision to Short run production decision to Long run production decision. As far as I've understood: consider an increase in ...
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What is the difference between horizontal short run aggregate supply curve and positively sloped short run aggregate supply curve?

Both of these curves corresponds to short run then what assumption leads to first one and what leads to second one? For horizontal SRAS we say that in the short run when we have aggregate demand of ...
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1answer
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Is there an economic theory that explains what happens when a market is saturated with a precious resource?

The theoretical situation is this. What if a record breaking amount of platinum were discovered. What would happen to the economies that use, store, and/or produce platinum? I would like to apply ...
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1answer
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Macroeconomics: effect of technology/workforce in the short run

My friends and I have homework and we can't come to a consensus on these questions on how they affect aggregate demand, aggregate supply, and equilibrium: Foreign investors building machineries with ...
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Linearization of VES production funtions

I know that the linearization of a CES (constant elasticity of substitution) funtion is a bit complicated. There is even an R package dedicated just for that - the econometric estimation and ...
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Estimating aggregate production function with sharp decline during a crisis period

How could one go about estimating a long term aggregate production function, when there is a sharp decline in both factor inputs (i.e. investment and hours worked) and output for a few consecutive ...
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2answers
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In microeconomics : is this the contradiction in the atomicity of firms ?

Let $p$ be the market demand. It is a function of the market production $Q$. Let $q_i$ be the production of firm $i$. Reading Steve Keen (in Debunking Economics, chapter II) quoting George Stigler, I ...
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1answer
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Complementarity in CES Production Function

I'm reading Fisher (1997, Journal of Monetary Economics). From the intermediate goods produced ($Y_t$), the final goods firm allocates into consumption ($C_t$), business capital investment ($I_{b,t}$),...
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2answers
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Will SRAS curve definitely shift if LRAS curve shifts?

From what I know, a shift in LRAS is generally caused by a change in maximum productive capacity of an economy, which affects the full-employment output level. Such change in maximum productive ...
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2answers
1k views

What is the difference between aggregate supply and GDP?

Usually when I read online, I see the following repeated frequently: aggregate demand is equal to GDP. I understand that aggregate expenditures is the aggregate demand at a particular price level, and ...
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Macroeconomics: Aggregate Demand, Equilibrium Dynamics and Expenditure Multipliers

I am having a hard time with the following economic questions (See attached). Here is my approach: Note about the curves: The graph below depicts an economy where a decline in aggregate demand has ...
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How do environmental deregulations push an economy inside its Production Possibility Frontier and make it inefficient?

I read in a textbook that if we plot a PPF with automobile manufacturing and clean air as the axes and the company pollutes the state making clean air (a public good) scarce, automobile manufacturing ...
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Difference between short run and long run supply curves?

We know that in short run supply curve is horizontal which means that prices remain rigid while quantity of supply adjusts according to demand. However, in long run this reverses. I know about some ...
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1answer
282 views

Aggregating CRS Production Functions

If thera are two firms and both of them have constant returns to scale production function. Will the aggregate/industry production function still be the sum of individual production functions. How ...