Which od the following statement is true about money? -it makes markets more efficient than barter -it requires a double coincidence of wants -it is not part of the circular flow -it decreases the efficiency of the market compared to barter
IS-LM-PC Analysis
The IS (Investment Saving), LM (Liquidity Preference- Money Supply), and PC (Philips Curve) is the model that looks at the dynamics of output and inflation. It takes into account the central bank policy decision to adjust the inflation and real interest rate in the economy. It enables the economist to weather to priorities between employment and inflation rate analyzing the model. It is a practice-driven approach adopted by economists worldwide.
IS-LM Analysis
The term IS stands for Investment, Savings, and LM stands for Liquidity Preference, Money Supply. Therefore, the term IS-LM model is known as Investment Savings – Liquidity preference money Supply. This model was introduced by a Keynesian macroeconomic theory which shows the relationship between the economic goods market and loanable funds market or money market. In other words, it shows how the market for real goods interacts with the financial markets to strike a balance between the interest rate and total output in the macroeconomy. This particular model is designed in the form of a graphical representation of the Keynesian economic theory principle. The output and money are the two important factors in an economy.
Which od the following statement is true about money?
-it makes
-it requires a double coincidence of wants
-it is not part of the circular flow
-it decreases the efficiency of the market compared to barter
Assume that Andy and Henry, without trading with each other, will produce and consume the following number of steel bars and ketchup bottles.
| The |
||||
| Without trade | ||||
| Person | Good | Production | Consumption | Gains from Trade |
| Andy | Steel bars | 60 | 60 | +35 |
| Btl. Ketchup | 60 | 60 | +15 | |
| Henry | Steel bars | 20 | 20 | +5 |
| Btl. Ketchup | 20 | 20 | +5 |
Now, Assume that both Andy and Henry decide to specialize, and then Andy trades 25 steel bars to Henry for 75 Btls. ketchup. This outcome is shown in the table below. Compared to the result without trade, what are the gains from trade that Andy experiences when he and Henry specialize and trade?
| The Gains from Trade | ||||
| With specialization | ||||
| Person | Good | Production | Consumption | Gains from Trade |
| Andy | Steel bars | 120 | 95 (keep) | +35 |
| Btl. ketchup | 0 | 75 (from Henry) | +15 | |
| Henry | Steel bars | 0 | 25 (from Andy) | +5 |
| Btl. ketchup | 100 | 25 (keep) | +5 |
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