Essays on Equilibrium Level

Q. 1. A. To calculate nominal, real, and GDP deflator, the following equations were used. Nominal (NGDP = Quantity (year) X Price (year), while real GDP) can be expressed as (RGDP = Nominal / Deflator), and GDP deflator can be expressed as (GDPD = Nominal / Real GDP X 100%). Therefore; (See Table 1.) B. For multiple items, calculating CPI requires a weighed average of the commodity price. In this sense, the prices of listed items were calculated as (Average = Bread price +TV Sets + etc. / 5) for each year. After which, the CPI was calculated using the equation (CPI of Multi ...

Government Actions in Markets

Figure 1 As a result of increasing the passenger movement tax on airlines, the equilibrium price P2 moves to new point P1. (P1>P2) The new quantity of flights is Q1. Therefore demand decreases, Q1 <Q2. Because of the increased prices some consumers denies to purchase tickets choosing other flight companies or using alternative ways of transportation. A tax that is imposed on sellers in fact creates a burden on consumers as well because of the fact that consumers will be forced to pay higher prices. It is clearly shows on the Figure1 that the revenue from sellers ...

The IS LM model or the Hicks –Hansen model is the macroeconomic tool that shows the relationship between the interest rates and the real output of goods and services and the money market. The intersection of the investment - saving curve or the IS curve and liquidity preference curve or the money supply curve is the general equilibrium in both the markets .This model explains the changes in the national income when the price level is fixed in the short run and also shows the reason for the shift in the aggregate demand curve. It was first developed by ...