In this article we will discuss about the general equilibrium of the ecomomy. In microeconomics we discuss the roles of consumer preferences and firms' behaviour in the determination of the prices of commodities and inputs. All our analyses so far have been partial, i.e., the analysis has been confined to analysing only some of the effects of the behaviour of [...]
Classical Theory or Real Interest Rate Determination Theory: Regarding the nature of interest, classicists were not unanimous. They regarded the nature and the determinants of the rate of interest in terms of a more complex pattern. Some classical economists like A. Marshall, N. W. Senior, E. Bohm-Bawerk, I. Fisher, etc., viewed interest from the supply side of capital, i.e., savings. [...]
Let us make an in-depth study of the Classical Theory of the Interest Rate. In the classical system all the three concepts of aggregate domestic expenditure — consumption, investment and government expenditure — play an explicit role in determining the equilibrium interest rate. In truth, the interest rate ensures that exogenous changes in any component of aggregate demand do not [...]