Journal of American Science 2014;10(12)

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1 Journl of Amrin Sin 214;1(12) p:// Aggrg Dmn & ggrg Supply: Formuling Equion n ir oliy Impliion in El Tir King Kli Univriy, Fuly of Aminiriv n Finnil Sin, Ab,KSA Emil: yn_99@omil.om Abr: roonomi inior li inflion, unmploymn wll pymn bln influn by nionl inom lvl n grow. To mng mro inior oug o ompromi nionl inom grow. Hn forizion of inom lp in ing inior bi iving ir rg lvl. Ti uy pproing nionl inom roug ggrg mn n upply, pifilly mp o formul quion o onp fili nlyi wll mngmn of nionl inom. Aoringly by olving finl quion uniqu quilibrium vlu o pri lvl n inom will b foun ou. From vlu xng r n inr r quilibrium vlu wr r, onqunly, ub mr quilibrium qunii will b obin. T ppro of i uy onnr on onomy ponil wi frm limi wiin wi poliy mr ign ir pln. Finlly oi bwn iffrn polii will blong o gomri vrion of mol, wi lo rionliz opion of pifi ool of oug. [in El Tir Aggrg. Dmn & ggrg Supply: Formuling Equion n ir oliy Impliion. J Am Si 214;1(12):235-24]. (ISS: ). p:// 29 Kywor: Aggrg mn, Aggrg upply, AS & AS nlyi, Equilibrium. 1. Inrouion: ionl inom rprn or of mroonomi ory, bu i rmin gnrl onomi inior u inflion n unmploymn. To lrg xn, inior rmin lvl of vlopmn n inom iribuion. Tu, ril pn on mmil moling of nionl inom rminn in orr o inrpr, xplin n onrolling u pnomn. I i wll nown nionl inom nrl or pivol rol in onomi lirur i xplin ll onomi pnomn rl o publi inr. Formlly ril u finiion quion of nionl inom in ynmi nlyi o inrpr yl pn of onomy. Ti uy im o mmiz ggrg upply n mn in orr o xplin n iffrn mroonomi ori(inprg, 1951). 2. T problm: T problm of uy m from iquilibrium of or or mr of onomy l o wn onomi grow. Hn i of mro mol i ruil in ring onomy bu i rfl quilibrium vlu of ggrg mn n upply. Tu, ril xplor quilibrium vlu of iffrn or, in iion o formul qu n rionl onomi polii on mro lvl in orn wi onomi ponilii. In or, uy fou on following mn: " mizion of nionl inom min omponn fili ling of onomi u". Howvr, uy' ppro iglig following qury: I gomrizion of AD & AS br off for nlyzing nionl inom? in lig of:- Drmining ponil of onomy vi quilibrium vlu of iffrn vribl wi oniu nionl inom or. Rolling ou onfli poliy mur oring o lop of AD & AS. Tolring ool b by rmining p of AD & AS. 3. Dvlopmn of AD & AS nlyi: A nrl Ovrviw il (1987) rgu ggrg mn n ggrg upply r onomi ool vlop o nlyi nionl inom, wi r origin of nionl inom bi for ff i. Furrmor niqu ign poliy mur in orr o onrol i movmn. AD & AS ppro ivi inom ino or or mr wi ovr rl or n finnil on. T mn i inlu prou mr, mony mr wll forign xng mr. Wil upply i inlu lbour mr n prouion funion. T inrion of prou mr, mony mr, n forign xng mr gnr w o ll IS & L urv. IS urv rprn quilibrium in prou mr, wil L rprn quilibrium in mony mr. From IS & L ggrg mn will b prou, wi in urn i invr rlionip bwn nionl inom n pri lvl. T min for wi ff ggrg mn r govrnmn xpniur n x r vi rl or. in iion inr r n xng r 235

2 Journl of Amrin Sin 214;1(12) p:// ff ggrg mn roug rnmiion nnl, formr ff rl mr vi invmn n finnil mr vi mn of mony, wil lr ff rl or in prinipl. ony mr oul ff by onrolling mony upply roug ury rrv, ioun winow wll opn mr oprion. Aggrg upply prou by inrion of lbour mr n prouion funion. T formr ff by wg r wil lr moiv by numbr of lbour for, pil wll of nology. In ff ggrg upply i ir rlionip bwn nionl inom n pri lvl. T inrion of ggrg mn n ggrg upply rmin quilibrium lvl of inom m im pri lvl quilibrium will b rmin. In ff full mploymn lvl inom i minly by onomi piy n prly by poliy mr ompromi. Aoring o onrn flionry n inflionry gp n xi. 4. Sool Db: T p n ug of ggrg mn n upply r ignifinly on onfli ool oug. For xmpl flxibiliy of pri n wg l o vril ggrg upply urv, wil rigiiy of m prou, o om xn, orizonl or fl ggrg upply urv. Flxibl pri n wg umpion prin o in mr mnim n full mploymn morovr non ffiv mn. T rigiiy umpion of pri n wg, l in or run, ni ppri rol of mn in rmining n onrolling quilibrium lvl of inom. Alo wiin mn onrn mony mr onirion oul p bi iring ggrg mn(imprg, 1986). Rionl xpion ool ou nionl inom nlyi vi i umpion bou mr up n inr r wi inorpor ino mol roug mn n upply omponn. w lil ool b onrning Lfr urv mor mpi on x lv from iniviul n oopr, n, i rnmi i ff o ovr wol onomy roug prouion n upply(wrny & Sroup, 1999). 5. Eonomi oliy: Aoring o poiion of nionl inom onomi poliy n b mooly l. T rminion of full mploymn i ruil in igning rin onomi poliy, onomy pony wll wrrn fuur grow of inom wr imporn in fining full mploymn. Wnvr lvl of full mploymn w prrmin inflionry n i ounrpr onrion poliy n ily run o iv mro rg. Dprion or inflion will b orr by uing ir mn or upply i polii. T iion of uing ir poliy r on wi ool of oug poliy mr op. In n opn onomy xng r n pil mobiliy ply ubnil rol in ffivn of rin poliy(exlnr, 1951) For givn poliy o b ffiv poliy mr oug o pr-rmin ir objiv n rg long wi ool or inrumn run in orr o rliz rg. ool n inrumn mu x numbr of rg o giv poliy mor flxibiliy, orwi mu l b qul o rg. T qu quniy of inrumn n b lul roug lilioo, lo funion wll Lgrng muliplir niqu(roolin, 1982). 6. Sbiliy & mol Dynmi(Cing, 25): T biliy of mol i nil in nlyzing nionl inom, i wr quilibrium xi or in iion o biliy of quilibrium. Sbiliy propri of mol wr vi gomri rrii of mol rlionip, nmly lop of ggrg mn n upply urv. T lop rmin gr of mol biliy, r w rfr o finl urv wll ub urv from wi finl urv wr riv. A fr ggrg mn urv IS n L urv rmin biliy wll xin of quilibrium in prou n mony mr. From pn n fln of urv quilibrium biliy n xin n b. Upwr n ownwr lop of L n IS rpivly impli xin n biliy of quilibrium, wil if u poiion wr viol ny viion from quilibrium onomy oul no rurn b. T m uion ol o ggrg mn n upply urv in wol onomy. T norml poiion of ggrg mn n upply r ff by ub urv poiion, upwr n ownwr lop of AS n AD rpivly rquir ub urv lop omb wi onomi ory. T ynmi nlyi of mol rvl oming bou i biliy rrii. Dynmi of mol rliz roug inring lg vribl in mol, lg lrify long run nny in mol o quilibrium. Anor wy for looing o long run in ym i o bli rrii quion n ing i roo, ngiv roo impli biliy ir momni or oill oring o roo mgniu. poiiv roo impli inbiliy ir momni or oill oring o roo mgniu. T onomi poliy ign oring o fur of biliy, u polii ir riv onomy o i quilibrium y p in of inbiliy, or uin biliy in of xin quilibrium. Wi onrn of biliy polii poliy 236

3 Journl of Amrin Sin 214;1(12) p:// mr mp o promo moo y p o nionl inom by ling ni ylil mur. T mur bln inom grow o grow in populion, pil wll nology. If poliy mr oul bl o mng bln bwn inom grow n prouion for grow onomy woul priing xlln prformn. In ff, r of unmploymn o b in n ppropri quilibrium lvl if r of inflion i o b bl. 7. mol Evluion (unnr Brn, l., 25. Arnol, 24) : In orr o vlu n onomi mol i i vlubl o invig rnmiion nnl, ing xogniy n invrin wll mol prformn. A fr rnmiion nnl or mnim quniiv piur of ow ng in nominl vribl bring bou rl ff in mroonomi mol. Ti prour i min objiv of wol moling xri, g, ow ng in xng r or inr r or vn pri lvl n ff ubmol n finlly nionl inom. So rnmiion mnim n b n omplx ym wr iffrn group of gn inr roug mr. An riv fur of mroonomi i i rprn iffrn ling in onin frmwor. In our riv mol fir w rmin quilibrium lvl pri, oringly xng r n inr r lul rpivly, n w inorpor quilibrium r ino ub mol or mr in orr o rmin ir quilibrium qunii. Finlly ow vlu fb nionl inom piy lvl. A fr ing xogniy n invrin mroonomi mol mu involv onomri ppro. T onp w xogniy n prmr invrin rfr o iffrn quion onrning vli oniioning in onx of imion n vli poliy nlyi rpivly. W xogniy of oniionl vribl for prmr of mol impli prmr r fr o vry wi rp o prmr of mrginl mol of nionl inom. Vli poliy nlyi involv nry oniion offiin of mol r invrin o inrion ourring in mrginl mol. Finlly in vluing mol prformn of im mol giv inig bou fibiliy of fuur mol implmnion. Hr ring prformn unr imulion i b niqu in ompring ul qunii vru im on. ny uggion onrning imion n imulion r vilbl li full informion mximum lilioo. Aoring o mol prformn for powr of mol pprnly bom jugbl. 8. Drivion of ppro' quion:- Algbr of IS urv (rou mr) ovrnmn xpniur (Conn) (1) Invmn I i y g..(2) wr; I Invmn Conn Eliiy of invmn for inr r i inr r ν Alror offiin Sving S..(3) wr; S Sving Conn rginl propniy o v Inom Tx T..(4) wr; T Tol x Inir x Dir x r Inom IS urv i riv by following rul:- I S T.(5) By ubiuing quion (1) o (4) in rul (5) w i y y y i y i y Algbr of (L) urv (ony r) Dmn for mony f i y.(6) (7) wr; Dmn for mony f Conn mn for mony liiy for inr r i Inr r rng of inom in form of mony Inom Supply of mony n i jp...(8) 237

4 Journl of Amrin Sin 214;1(12) p:// Wr; ony upply n Conn Supply of mony liiy for inr r i Inr r j Supply of mony liiy for pri lvl p ri lvl (L) urv i riv by following rul:- (9) By ubiuing quion (7) n (8) in rul (9) w g f i y n i jp y n f i i jp n f j y i p..(1) By uming fix pri lvl, from quion (1) rm (j/) qul zro rfor (L) ur only funion in inr r n f y i (11) 9. Drivion of (AD) urv:- Aggrg mn i rlion bwn inom n pri lvl n i riv from quilibrium of prou mr n mony mr. T pion wi pri lvl ppn in mony mr quion (1). A fr quilibrium lvl of inr r i g from prou mr, IS urv, quion (6) follow:- y i i y.(12) By ubiuing quion (12) in quion (1) w g:- n f j y y p.(13) By ring rivion w g ggrg mn urv from quion (13) in i finl form follow:- n f j y p (14) 1. Drivion of (AS) urv:- Dmn for lbour L o z (15) wr; Dmn for lbour O onn z lbour mn liiy for wg ω rl wg ominl wg urv i (Hyprbol) on of i propri i:- p x (16) Wr; p ri lvl ω Rl wg x Conn From quion (16) quilibrium rl wg qul:- x p...(17) By ubiuing quion (17) in quion (15) w g quilibrium quniy of lbour follow:- * 1 L o zx p...(18) T prouion funion if pil n nologil r fix i:- L L * y (19) Wr; y Inom Conn oun for pil n nologil Coffiin of lbour L * Equilibrium lbour quniy By ubiuing quion (18) in quion (19) w g ggrg upply urv (AS) follow:- 1 y o zx p 1 y o zx p...(2) A ggrg upply funion in pri lvl, w noi pri lvl in quion (2) in form of (1/p), rfor prou of ubrion i poiiv n n rlionip bwn pri lvl n inom i ir pi ngiv ign in rig i. 11. Exnion o opn onomy: In i w forign xng mr in orr o oun ff of inrnionl xng. Hr w xpor plu pil inflow mn i n impor plu pil ouflow upply i. Tn w ubr upply from mn n n finl rul i forign xng urplu. W i urplu (in rm of pri lvl n inr r) o ggrg mn quion in op of rivion finl quion of ggrg mn wi ff of 238

5 Journl of Amrin Sin 214;1(12) p:// 239 inrnionl xng. Hr blow quion of forign xng mr:- Expor E X (21) Wr; X xpor onn liiy of xpor for pri lvl liiy of xpor for inom liiy of xpor for xng r Impor E.(22) Wr; Impor onn liiy of impor for pri lvl liiy of impor for inom liiy of impor for xng r Cpil inflow i C inf. (23) Wr; C inf pil inflow m onn liiy of pil inflow for inr r Cpil ouflow i C ouf..(24) Wr; C ouf pil ouflow n onn liiy of pil ouflow for inr r In orr o pu quion of forign xng mr only in rm of pri lvl n inr r w r xng r in rm of inr r follow:- Exng r E I..(25) Wr; E xng r onn liiy of xng r for inr r T forign xng mr urplu i.(26) (for il quion rivion Appnix 1) From quion (12) inr r i; I T forign xng urplu only in rm of pri lvl n inr r i;..(27) W urplu o quion (14) j f n (28) T finl quion of ggrg mn i; f n 1 j 1 (29) 12. Rul &oliy Impliion T fir rul i rmining quilibrium vlu of inom n pri lvl, n w ubiu vlu in forign mr in orr o fin quilibrium vlu of inr r n xng r. T on rul i ubiuion iffrn quilibrium pri n inom in mr o fin quilibrium lvl of invmn, x, ving, xpor, impor, onumpion, lbor, n nominl wg. Afr iming iffrn funion n inring prmr in moling quion, w u:- () From quion (6) n (16 & 29) w n g nowlg bou xin n biliy of

6 Journl of Amrin Sin 214;1(12) p:// quilibrium. Hr w n u nlyil gomry o rmin gr of fln n pn of (AD) n (AS) urv (b) From quion (2) n (29) w n b bl o rmin p of (AD) n (AS) urv. T grpi rprnion of wo urv xplin of onomy from poin of full mploymn, in iion, w n l uibl mn i or upply i poli oring o of onomy. () From iffrn im prmr i oul b bl o oun muliplir of fil n monry poliy. Su muliplir lrify limi of ffivn of fil n monry polii in prn of rowing ou mnim. () AD & AS quion ll u bou piy of onomy wi rmin full mploymn of inom. () AD & AS quion provi ynmi nlyi of inom from bo i of onomy (Dmn & Supply) r w u liiy of AD & AS o rmin biliy rrii of onomy. (f) From IS & L quion w n rmin ffivn of fil n monry polii n ffivn of upply i polii from of AS 13. Anowlgmn: T uor i inb o profor ormn Ob (profor of onomi- iign S Univriy- Dprmn of Eonomi) for i unlimi vlubl ommn n inifi viw bou ugg mol n i impliion. Alo inb o Dr Am El-oli (Aoi profor in Eonomi- Univriy of nofi- Egyp) for i n vi uring formuling uy. Rfrn: 1. Cing, C. A., Funmnl o of mil Eonomi 4 iion- rw ill o Arnol Zllnr Sii, Eonomri & Foring Cmbrig univriy pr o 4 3. Exlnr gry pvlopmn of onomi Doorin url r limi o Inprg Hn Rim Dvlopmn of onomi Anlyi four iion-homwoo o unnr Brn & or T Eonomri of mro onomri oling, Oxfor univriy pr o Jm wrny & Rir Sroup mro onomi, priv & publi oi- nw yor 1999 p 345 o il R., roonomi, ory & pri p 291 o Roolin Lvi i & ynmi nlyi milln pr l, o 363 Appnix Appnix 1 For quion 26 E i E i.(1) E i......(2) I i (3) I i..(4) Tu, i oul b rwrin : i 12/25/214 24