Say’s Principle, What it Means… (Exam 2)

Commodity

Any exchangeable object

The net value of an individual’s planned trades is identically zero

How is Say’s Principle defined as, according to Clower and Leijonhufvud

It does not prove markets clear, does not prove equilibrium is stable or exists, does not rule out large-scale unemployment

Why does Say’s law not guarantee full employment

Transactor

Any economic agent or decision-making agent

Total value of separate items must add up to $10

If one pays $10 for all groceries he acquires, then…

Notional behavior

Actions or patterns that exist purely as theoretical

General Equilibrium

An economic model that studies how supply and demand interact across all markets simultaneously to reach an overall balance