The following article will guide you about how the product market adjusts. Equilibrium in a typical product market of which there are many in the economy, is shown in part(a) of Fig. 33.4. The intersection of the product demand curve (DD) and the product supply curve (SS) determine the equilibrium price P0 and equilibrium output Q0. A fall in aggregate [...]
Read this article to learn about the Classical Theory of Employment! The term 'classical' was used by Keynes who, by it, referred to all economists who were concerned with macroeconomic questions before the publication of J. M. Keynes' The General Theory of Employment, Interest and Money’ in 1936. Modern economists believe that people like A. Smith, D. Ricardo, J. S. [...]
The following points highlight the three main components of the classical theory of employment. The components are: 1. Employment-Output Determination 2. Price Level Determination 3. Interest Rate Determination. Component # 1. Employment-Output Determination: The Labour Market: Let us first consider the labour market where we deal with production function in which capital stock is fixed and labour is the variable [...]