Linear Economic Data
14 September, 2017
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Linear Economic Data

Introduction

Perhaps, the widely acceptable economic data is that which is linear. In most cases, people would like a change that corresponds with the input in an economic system. For this research, the main focus is on; The Classical Model, the Keynesian IS/LM and the Mundell-Fleming Model, in the chronological order (Philips, 1958).

Nature of the Economic Data from the Models Chosen

The data used in the Classical Model is linear since it show a direct comparison of the variables, which are used. Essentially, production is directly proportional to the employment. For example, an increase in employment equally raises the volume of production. Consequently, this leads to profit maximization in a company. Also, the Keynesian IS/LM shows how unemployment in an economic setup could result to the equilibrium (Baumal, 2007). For example, when the IS curve when plotted against the LM curve gives the equilibrium, showing that any change in one variable would yield similar effect in the other. As a result, this model can also be classified as linear.

Considering the Mundell-Fleming Model, the fiscal policy is compared to those of exchange rate in a particular economy. In this case, when the variables in the fiscal policy are plotted against the exchange rate at a time, then equilibrium is reached (Blaug, 2007). Notably, the equilibrium varies according to the exchange rate in that economy. For example, if the capital mobility, whether perfect or imperfect is calculated and plotted against the foreign income or the government expenditure, equilibrium could be reached (Blaug, 2007). Therefore, it signifies that the model is liner since a shift in the monitory policy, which is an input directly affect exchange rate in an economy.

Conclusion

To conclude, it is realized that the three models discussed above are linear, in that the specific variables compared in each, show that an increase in the input has a corresponding increase in the output. A similar corresponding result is shown in the reduction of the input and this is the essence of the linear data.

14 September, 2017
visibility 1

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