Model
Digital Document
Publisher
Florida Atlantic University
Description
This study demonstrates the importance of dynamic economic analysis, the role
played by difference equations in such analysis and the properties of systems of
difference equations. This is accomplished by proving the significance of dynamics
in general and difference equations in particular using the Cobweb model and the
"correspondence principle". The properties of systems of linear, first order difference
equations are discussed in detail and it is shown that a system of any order
can be reduced to first order so that the discussion is completely general. The
properties included in this analysis ore the traverse, impact, delayed, cumulative
and long run multipliers, and stability of a linear system. A simple Keynesian
model of income determination is estimated and simulated by the computer to
facilitate observation of these properties.
played by difference equations in such analysis and the properties of systems of
difference equations. This is accomplished by proving the significance of dynamics
in general and difference equations in particular using the Cobweb model and the
"correspondence principle". The properties of systems of linear, first order difference
equations are discussed in detail and it is shown that a system of any order
can be reduced to first order so that the discussion is completely general. The
properties included in this analysis ore the traverse, impact, delayed, cumulative
and long run multipliers, and stability of a linear system. A simple Keynesian
model of income determination is estimated and simulated by the computer to
facilitate observation of these properties.
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