标签：case GDP Assume self criteria Step income economy

Assume the self-correcting economy's criteria, and predict the possible consequences of rent decrease in the economy's real GDP and the price level. Why would leaving the economy to self-correction not a good idea in some instances.

(由留学作业帮www.homeworkhelp.cc整理编辑)
Bartleby｜Bookrags｜brainly.com｜Coursehero｜Chegg｜eNotes｜Ebook|gradebuddy｜Grammerlly|Numerade ｜QuillBot｜Oneclass｜Studypool｜SaveMyEaxms｜Studymode｜ScholarOne｜SlideShare|SkillShare|Scribd｜SolutionInn｜Study.com｜Studyblue｜Termpaperwarehouse｜and more…

---

Expert Solution arrow_forward Step 1

If rent decreases, then the income of land owners will decrease as a result. Hence, national income which is the sum total of incomes earned by all the nationals of an economy, either residing within the country or abroad, will also reduce.

By income method, national income is given by-

Rent + wages + interest + profit + NFIA

(NFIA = net factor income earned from abroad)

If rent falls everything else remaining unchanged, then national income should fall.

 

arrow_forward Step 2

If aggregate income falls, then this should reduce aggregate demand as well because people would have less income with which to purchase goods and services. This in turn would lead to a decline in the price level.

Now real GDP = nominal GDP/price level

If the price level reduces nominal GDP remaining unchanged, then real GDP would rise.

arrow_forward Step 3

Leaving the economy to self-correction is not a good idea always because sometimes this may result in market failure. Market failure is said to occur when an economy left on its own fails to allocate scarce resources efficiently. This can happen in the case of provision of public goods, in case of common property resources, in case of imperfect competition or in case of goods generating externalities either in its production or consumption. In case of such goods, private producers are inefficient in their production and distribution, and hence government intervention becomes necessary.

arrow_forward Step 4

Government also has to intervene in order to redistribute income from the rich to the poor for reducing the degree of income inequality in the economy. Apart from these, maintenance of law and order, framing of laws, policies and regulations all constitute the task of the government. If the economy is left to self-correction, then market prices may sometimes reach to extremely high or very low levels, thus disadvantaging either producers or consumers. In such situations, government has to intervene.

标签：case,GDP,Assume,self,criteria,Step,income,economy
来源： https://www.cnblogs.com/coursehero/p/16124836.html

本站声明： 1. iCode9 技术分享网（下文简称本站）提供的所有内容，仅供技术学习、探讨和分享；
2. 关于本站的所有留言、评论、转载及引用，纯属内容发起人的个人观点，与本站观点和立场无关；
3. 关于本站的所有言论和文字，纯属内容发起人的个人观点，与本站观点和立场无关；
4. 本站文章均是网友提供，不完全保证技术分享内容的完整性、准确性、时效性、风险性和版权归属；如您发现该文章侵犯了您的权益，可联系我们第一时间进行删除；
5. 本站为非盈利性的个人网站，所有内容不会用来进行牟利，也不会利用任何形式的广告来间接获益，纯粹是为了广大技术爱好者提供技术内容和技术思想的分享性交流网站。