Answer to Question #195695 in Economics for Ana

Question

Consider the Kaldor’s model for equilibrium price given by the following equations

D_t = a - bq_t

S_t = a₁+ b₁p_t -1

D_t = S_t

Where a = 2,b = 3,a1 = 3,b1 = 2,p₀ = 1,05

a) Explain the significance of each variable and derive the price trajectory.

b) Compute the fixed points of the price trajectory and analyze the system’s stability

c) Compute the supply and demand trajectories.

Answer 1

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