where [p.sub.t] denotes the relative price of investment to
consumption goods at time t.
A symmetric equilibrium at steady-state is when there is a number of firms in each sector j, quantities and prices for each differentiated
consumption goods are identical for all qj and for all j such that: [Q.sub.j] = Q for all [MATHEMATICAL EXPRESSION NOT REPRODUCIBLE IN ASCII] for all qj and for all j.
In each period, two goods are produced, a (non-storable)
consumption good denoted by c and a capital (investment) good denoted by k.
This fall in GDP, though a natural consequence of lower imports of
consumption goods, is often mistakenly perceived as something to be avoided, because it seems to imply that output is below its "potential."
Housing differs from other
consumption goods in important ways.
The minister said 38 percent of participants imported intermediary goods, 14 percent imported
consumption goods, 7 percent imported investment goods, and 11 percent imported other goods.
In Prescott (1987), Ireland (1994), Lacker and Schreft (1996), and Aiyagari, Braun, and Eckstein (1998), there are alternative means of payment (for example, bank draft, private securities, and credit) other than cash, and an economic agent can choose different means of payment when acquiring
consumption goods. In addition to the opportunity cost of holding cash (i.e., the nominal interest rate), the transactions costs of alternative means of payment are introduced as a tradeoff.
"At times of a financial crisis, when unemployment is increasing by the day; when the high cost of living is baring its teeth with daily and repetitive increases on
consumption goods, we have in front of us simultaneous increases by various services, such as electricity, water supply and telecommunications," said Varnava.
For example, "television watching" and "eating a meal" are both
consumption goods. Both combine individual time with market expenditures.
The first two papers are highly theoretical: one addresses neoclassical growth models and argues that a two-sector model is preferable because technological shocks have different effects on investment goods and
consumption goods; the second theoretical paper embeds a production function--which specifies total output for all combinations of inputs--within a dynamic stochastic general equilibrium model and argues that policymakers need models which enable them to compare flexible price concepts based on the production function approach with those based on the real business cycle approach.
Those losing their jobs are, of course, less likely to spend on
consumption goods.
