The simplified cycle model is a form of the economical cycle model, in which the state and the foreign trade do not play a role. Only the restaurant units enterprise (productive restaurant unit) exist, households (konsumtive restaurant unit) and the cycle model is regarded only money stream and no goods stream. In the cycle model the following terms are used:

• National income (Abk. Y): Hums all earned incomes and enterprise and fortune incomes in a national economy
• Consumer expenditures (Abk. C_H): Expenditures for consumer goods on the part of the households
• Replacements of investments (Abk. I ^e): see there
• New investments (Abk. I^n): Investments of the enterprises in itself, usually by credits
• Save the households (Abk. S_H): Wage portions saved by the households

If the model is in the equilibrium, then the money stream must always correspond to the money stream away from the sectors to the sectors. That means that

• Y = C_H + I^n (enterprise sector)

and

• Y = C_H + S_H (household sector)

it is from which follows that

• C_H + I^n = C_H + S_H

and thus

• I^n = S_H

is, which is called Keynes' investment equation.

The statements of the Keynes' investment equation:

1. At expiration of one restaurant period S_H and I^n are alike.
2. In a national economy fortune in material form can be formed only by production by goods, which [u] are not used [/u] in the household sector.

But: Savings are [u] not necessarily [/u] a condition for investments!

Since reality however the case that equal to planning and actual sizes are, arises very rarely (due to the easy influence by determinants such as interest height, paragraph expectations or income distribution) takes place then one of two reconciliations.

1. Price reconciliation:

If the demand should be larger against expecting the enterprises than the offer, they increase the prices so far, until the demand corresponds again to the offer

1. Material reconciliation:

If the demand should be larger against expecting the enterprises than the offer, the enterprises increase the consumer goods existence (by decrease of the stock bspw., which corresponds to a dismantling of investments), until the demand can be satisfied

Articles in category "Simplified cycle model"

We found here 24 articles.