Question

Short Answers: Write a paragraph about each topic/question.

A. Macroeconomic Disequilibrium Describe the macroeconomic disequilibrium in the

Soviet Union. Why was there a disequilibrium? What was the resulting problem?

B. Perfect Market “A complete, competitive, full-information general equilibrium is efficient.”

Explain this statement in detail and discuss what happens when some of the

conditions are violated.

C. Marx on Capitalism Use Marx’s labor theory of value to explain the breakdown of

capitalism.

D. Participatory Economy Is there more or less investment in a participatory economy

than in a capitalist economy? Relate your answer to the difference between who owns

Capital and who gets profits. Explain.

Answer 1

A.

Macroeconomic disequilibrium offers a better explanation about macroeconomic instability. It is a tradition of research centered on the role of disequilibrium in economy. If Soviet union is facing macroeconomic disequilibrium, it means aggregate supply in this economy doesn't meet it's Aggregate demand. If the economy is in disequilibrium, the economy must be suffering from unemployment, as it's a general macroeconomic disequilibrium assumption , where ecinomists argued that unemployment resulted from disequilibrium.

The macroeconomic disequilibrium occurs due to disbalance in aggregate demand and aggregate supply. This may occur because may be there is a price which is false price and doesn't allow the economy to reach general equilibrium. This results in unemployment which is either Keynesian unemployment with excess supply of goods and labor or, classical unemployment with excess demand for goods and excess supply of Labor.