Wednesday, January 19, 2011

Saving is good, in a moderate amount: a Macro analogy

 The Starlings World, stage, 1 is in perfect equilibration, but as the population grows, and they don't save anything, and consume and waste way too much, there's almost nothing left, and what's left costs a fortune (stage 2).
In Macroeconomic terms, the European Starling has a 100% MPC (marginal propensity to consume), leaving 0% MPS! (S=save). Their analogy is a way to show what happens when no one saves in an economy. GDP would be huge at first (if they payed for what thay ate and destroyed!), the Starlings eat all available food, the economy is fine in the Short Run, but soon the Demand curve has moved way off the graph, though positively, and the supply curve diminishes. When demand is over supply, because the Starlings don't store any of the food, the farmers can't keep up and there is a huge depression as farmers are forced to resign. All beings suffer.

Of course, my biggest flaw here is that Starlingds don't pay the farmers, so the outcome would come much faster if the Starlings were left to themselves!

I should be taking the Macro test Friday, but I want to be able to do it tomorrow.
Pray for my success, tomorrow, Lord willing.

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