GATE (Graduate Aptitude Test in Engineering) Economics (XH-C1) Macroeconomics-Theories of Consumption Study Material (Page 9 of 19)

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Models of Economic Growth

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Models of Economic Growth

  • The model given by Kaldor depends upon the fact that a satisfactory growth model shall be capable of explaining various stylized facts of growth which are experienced by various countries around the globe.
  • He attempts to provide a framework for relating the genesis of technical progress to capital accumulation.
  • Assumptions of the model are as follows:
    • The general level of output in a growing economy is not determined by effective demand but by the availability of resources in the economy. It means that the economy operates at full employment equilibrium in the short run.
    • The model is based upon the aggregate concepts of income, profits, s…

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Inflation: Demand Pull and Cost Push Inflation

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Inflation

Inflation is the chronic and sustained rise in prices caused by an increase in the supply of money.

Demand Pull Inflation

  • Demand pull inflation refers to a situation in which aggregate demand at the existing price level far exceeds aggregate supply of goods and services. Such inflation occurs due to excessive demand. Factors responsible for this:
    • The major source of inflation is increase in money supply in the economy. Increase in money supply results from an increase in demand deposits and expansion of loans and investment by commercial banks.
    • An increase in disposable income results …

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