A budget line or budget constraint illustrates the alternative combinations of two different goods that can be purchased with a given income based on the prices of the two goods. Or budget line indicates the combination of commodities that a consumer can buy with a given income at a given set of prices
Define Stagflation through Diagram, In stagflation both the higher level of employment and inflation are attached. It is therefore, also called “Inflationary recession.” According to Keynesian stagflation occurs due to rise in cost of production or fall of supply. If the supply goes downward it will certainly affect the price level which will go higher.
The Keynesian theoretical consumption function, as elaborates by the post Keynesian economists likes James Tobin, Arthur Smithies is called the absolute theory of consumption. Consumption spending is the positive function of the absolute level of income that is, higher the level of current income, higher is the consumption demand and vice versa
Even before the publication of Johan Maynard Keynes book, some economists were of the view that income and consumption were functionally related. However, it was Keynes who first stressed the importance of the positive functional relationship between aggregate income and aggregate consumption. The consumption function c = f(y)
"Inflation is inevitable like death" is the saying of one of the economists. It can also be defined as, "a state of disequilibrium between the purchasing power which is increasing and the output of goods and services which is not increasing to a corresponding rate."
Unemployment takes place when people have no jobs and they are willing and seeking for work. Some People give importance to the number of unemployed individuals but Economists focus on rate of unemployment which can be measure as dividing unemployed workers divided by all individuals in the labor force.