Explore BrainMass

Explore BrainMass

    Defining Economic Terms

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Define and discuss

    - Stagflation

    - Real and nominal variables

    - Marginal productivity theory of distribution

    - Business cycle

    © BrainMass Inc. brainmass.com November 24, 2022, 11:30 am ad1c9bdddf

    Solution Preview

    BrainMass Posting # 2570

    Define and Discuss:-

    (i) Stagflation
    (ii) Real and nominal variables
    (iii) marginal productivity theory of distribution
    (iv) business cycle

    i) Stagflation: Stagflation is a combination of inflation and a contraction of real GDP. Unlike regular inflation, this event is a one-time rise in the price level.
    Suppose, that last year price level was 110 and real GDP was $7 trillion. Potential real GDP was also $7 trillion. The following figure illustrates the situation. The aggregate demand curve was AD0, the short-run aggregate supply curve was SAS0, and the long-run aggregate supply curve was LAS. In the current year, the world's oil producers form a price-fixing organization.

    Price Level LAS SAS1

    120 SAS0



    0 6.0 6.5 7.0 7.5 8.0 8.5
    Real GDP (trillion $)

    FIGURE: Showing stagflation

    Initially, the aggregate demand curve is AD0, the short-run aggregate supply ...

    Solution Summary

    The solution goes into a tremendous amount of detail to explain the four terms being asked below. Detailed steps are provided for everything including graphs as well. The response is very well written and easy to understand as well. Overall, an excellent response. This is ideal for students who want a through and deep understanding of the terms being asked below.