# Tag Info

6

Price level is the general level of prices in an economy. It is a variable that indicates what is the purchasing power of money (see Blanchard et al. Macroeconomics: a European Perspective). You can think of it as a variable that tells you what average prices are compared to some baseline. Price level is often measured using the consumer price index (CPI). ...

5

Material capital is any durable good that is used as a factor of production and, by virtue of being durable, it is gradually consumed in production over a maximum possible duration of a length that is determined by (i) how much a unit of capital is used and (ii) the depreciation rate of a unit of capital. Capital forms by labor and savings (which is in ...

5

My guess is that it is not a new factor of production, but simply a type of total factor productivity. This is because: factors of production are a stock, which produce services. What is the stock of AI? The stock of labour is easy to calculate. The stock of capital is more complex, but at least all capital goods (even robots) have a market price. As such, ...

5

If your aim is to maximize the production then your approach is correct. But if the aim is to find the optimal number of units of labor, then you should solve it as a profit maximization problem with a budget constraint. Then the problem should be as following Maximize the profit such that the total cost spent on production does not exceed the budget $$Max_{... 3 The following is from Thomas Piketty and Gabriel Zucman (2015, From Handbook of Income Distribution, Volume 2, Chapter 15, Part 15.5.3 which is hard to link to directly but get it here): Take a CES production function$$Y=F(K,L)=(a⋅K^{\frac{\sigma-1}{\sigma}}+(1−a)⋅L^{\frac{\sigma-1}{\sigma}})^{\frac{\sigma}{1-\sigma}}$$Me: \sigma is the elasticity of ... 3 k_t is your capital after investment, so if you subtract the capital you carried over from last period, k_{t-1}(1-\delta), you obtain the amount that must have been invested in order to have k_t of capital today. Remember that k is a stock variable, while i is a flow variable. This is why the flow i_t is the difference between the current and ... 3 This is a subtle issue. First let's present a numerical example to see the head-scratching riddle. Assume$$\alpha =1/2 \implies Y = K^{1/2}L^{1/2}$$and that the exogenously given input prices are$$r=1/8,\,\, w=4.$$The f.o.c are$$\begin{cases} \frac {Y}{2K} = 1/8 \\ \\ \frac{Y}{2L} = 4 \end{cases} \implies K/4 = 8L \implies \left(L/K\right)^* = 1/32$... 3 A clarification: The values$w,r$are not independent of input combinations: you have already solved for$K/L$. 1) Unless you assume that the price of the output is equal to 1, there is a minor mistake, as output prices affect factor prices. 2) If there is a profit maximizing pair$(K,L)$, then for all$\alpha \in \mathbb{R}_+(\alpha K,\alpha L)$will ... 3 In the short run, you cannot sell your capital. To do so would be a violation of "short run" and would instead be the "long run". Case 3 (and I would also contest Case 2) are outright forbidden by the definition of short run. I would note that your question has a lot of narrative to it - which is good in some cases, but you want to keep ... 3 You should interpret$P$as being the price of some bundle of goods people want to consume. Then if we have some monetary amount (in dollars, euro's or some other monetary unit of account), let's call it$M$, what does$M/P$mean? Note that:$P \times (M/P)=M$so$M/P$is the number of consumption bundles with price$P$you can buy with your$M$units of ... 3 My impression as a non-economist is that there has not been much interest in the 21st century in these debates and it is not taught to students. This is misconception but understandable one (I will get to the understandable part at the end). According to The New Palgrave Dictionary of Economics (Becker, 2017) - leading source for economic terminology - ... 2 From a Marxist perspective, capital is a social relation. Essentially, it is money that begets more money. As such, it only becomes more or less synonim with "means of production" once it takes over production, ie, once society becomes capitalist. In a feudal society, tools and land are not capital, albeit being means of production. The money of money ... 2 In the model with technological progress the capital per effective worker remains constant, implies that capital per worker grows at the rate of exogenous rate of technological progress. See Barro and Martin book, Chapter 1. 2 What I think you want to consider to be grouped with land, labour and capital is another factor to be considered with labor- technology (A.K.A "Knowledge*). The term "technology" here means an augmenting factor which is external to the present amount of labour. This can mean improved machinery to produce goods and services or alternatively, this can be ... 2 To add to @keepAlive's answer, even when natural resources are added typically stocks are used, at least in theoretical work. The flow of the used up resource is converted to a stock variable by assuming a fixed percentage of depletion each year (see for example Nordhaus Lethal model of 1992 here) 2 This is no different from any other markets... just for money. On the demand side of the goods, those who want money (those who sell bonds) say how much they're willing to pay in terms of bond yields. The supplier of the goods (bond buyers) come to the bond market and choose the product. Under a developed bond market, it's guaranteed that those who get the ... 2 Industrial capitalism, characterized by its use of heavy machinery and a much more pronounced division of labor. It is a system whereby industry and resources are owned by few for profit. In this capitalist system means of production were privately owned. Its is marked by the rise of monopolies and trusts dominating industry and other aspects of society. ... 2 First, important thing to note here is that$K/Y$is not the capital income to labor income ratio, but ratio of capital to total income (or output which is macro-economically equivalent to income).$K$is not an income derived from capital it is the stock of capital. Wars destroy the stock of capital so even though returns to capital$r\$ indeed increase ...

2

Different sides of the balance sheet. Capital represents long-dated instruments (infinite lifetime in the case of common equity) issued by a bank that are subordinated in a way to make them comparable to equity. (Can include instruments that are technically liabilities.) The existence of capital means that assets are greater than non-capital liabilities, i....

2

This is not really an economic terminology. Many words can have multiple meaning in common English. According to the Oxford dictionary: structure /ˈstrʌktʃə / ▸ noun 1 the arrangement of and relations between the parts or elements of something complex. ... 2 a building or other object constructed from several parts. In case of that article the first ...

2

Consider this... A bank's capital is used to finance the purchase of assets. Those assets are mostly loans made to households and businesses and governments. When a loan is made the bank is "buying" the future payments of the borrower. This suggests the whole right side of the balance sheet is capital because it takes the entire right side to finance the ...

2

The term FDI is generally reserved for foreign capital investment in domestic assets of the host country for business interests as opposed to hot flows which are generally aimed for quick capital gains. Examples of FDI would include take-overs of firms, collaboration/merger with a domestic company, entry into a new market, etc. Such investment give returns ...

2

You are concerned about... someting that can save the bank from bankruprtcy it problems occurs, when there is no money This is an accounting question as much as an economics question. What you are asking about is "solvency". assets minus liabilities equals equity The bank or any company is solvent by definition if equity is positive and ...

2

I think I get the answer but I am not 100% sure. Any comment would be welcome. I realized that this is related to the search-matching nature of the model (comparing to competitive labor market), so that if capital is not perfectly reversible the worker can bargain with the firm. Note that even with perfect reversibility, given the match-specific surplus, the ...

2

A derivative is a financial instrument whose value is dependent on an underlying asset. However it does not represent this asset nor does it hold any claim on the asset. At the end of the day, the only thing that happens with a derivative is that money is transferred between the agents that are involved in the derivatives contract. On the other hand, if you ...

2

Capital in economics normally means machines and tools used in production. However, confusingly the national accounting uses the accounting terminology where capital just means: Definition: Capital refers to the financial resources that businesses can use to fund their operations like cash, machinery, equipment and other resources (source). The accounting ...

1

In National Income Accounting, the capital stock is divided into structures and equipment. Equipment consists of machines, transport equipment, etc. Structures are buildings, bridges, etc. For definitions, see https://www.bea.gov/resources/learning-center/definitions-and-introduction-fixed-assets

1

One thing that could be made more explicit is that the capital is presumably for export employment and the existence of these employees will require additional local employment. Export employment is a job that produces a product for outside the city, local employment produces a good/service internal to the city. To use your example, if a car factory brings ...

1

It really depends on how far the factor/company is from state B. Obviously, it would be a big boon to state A. When a factory opens in a local economy many things does happened outside of job gains. Like increasing the Tax Base: local businesses increase their tax dollars stay within the local economy, helping to improve their community as a result. ...

Only top voted, non community-wiki answers of a minimum length are eligible