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INFLATIONARY GAP, KEYNESIAN MODEL: The difference between equilibrium aggregate production achieved in the Keynesian model and full-employment aggregate production that occurs when equilibrium aggregate production is greater than full-employment aggregate production. An inflationary gap, also termed an expansionary gap, is associated with a business-cycle expansion. The prescribed Keynesian remedy for an inflationary gap is contractionary fiscal policy. This is one of two alternative output gaps that can occur when equilibrium generates production that differs from full employment. The other is a recessionary gap.
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                           VALUE: The worth members of society place on a good, service, resource, commodity, or other asset, which is based on the direct or indirect satisfaction of wants and needs generated. In an economy that uses markets to exchange commodities, value is commonly indicated by price and measured by the economy's monetary unit. The ultimate source of value is the amount of satisfaction generated from consumption. More satisfaction means more value. However, because value is based on satisfaction, it is highly subjective. What is valuable to one person might not be valuable to another.To Each Their OwnThe satisfaction generated by a particular commodity depends on the person being satisfied. As such, value also depends on the person doing the valuation. A particular good can generate a great deal of satisfaction, and hence be quite valuable, for one person, but not so for another.- Donna Newberry, for example, thoroughly enjoys the taste of horseradish sauce. She applies it to anything and everything--hot dogs, bologna sandwiches, ice cream, apple pie, breakfast cereal. It provides Donna with a great deal of satisfaction. As such, Donna places a high value on horseradish sauce.
- Rhonda Newberry, Donna's twin sister, has a dramatically different opinion of horseradish sauce. She hates it. She hates it with a passion. Not only does Rhonda not apply horseradish sauce to any food product, she does not patronize a restaurant that serves it. Horseradish sauce provides Rhonda with no satisfaction. As such, she places a low value on horseradish sauce, as in zero.
If everyone derives the same satisfaction from the consumption of horseradish sauce as Donna Newberry, then the price is quite high. However, if the public subjectively values horseradish sauce like Rhonda Newberry, the price is very low.Indirect ValueThe value of consumer goods depends directly on the satisfaction generated. Donna is willing to a pay a premium price for horseradish sauce because she likes it, it satisfies her wants and needs.In contrast, the value of productive resources (labor, capital, land, and entrepreneurship) is indirectly based on the value of the goods produced. A resource used to produce a good highly valued by society is also valuable. Consider the situation facing two equally intelligent, equally talented, equally industries, college graduates. - Robert Fredrickson decides to pursue the study computer programming. Fredrick Robertson, his college classmate, chooses to study of classic English literature. The outcome seems obvious. The value of the labor resources of each graduate is ultimately based on the value of the goods each produces.
- Robert Fredrickson takes a job with OmniComputer. The software he helped to develop, along with a hundred and forty-three other programmers, sells for $49.95 and is used by millions of computers. Based on software sales, OmniComputer places an annual value of $75,000 on Robert's productive resources.
- Fredrick Robertson, in contrast, spends over a decade as a starving artist working on a science fiction trilogy. The trilogy sells over 100 million copies. Based on book sales, Fredrick's book publishing company places an annual value of $10 million on Fredrick's productive resources.
Fredrick receives more income each year because the good he produces with his labor resources (best selling science fiction trilogy) is more highly valued by the public than the good (moderately priced computer programs) Robert produces with his labor resources.
Recommended Citation:VALUE, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2025. [Accessed: January 25, 2025].
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Today, you are likely to spend a great deal of time at a going out of business sale trying to buy either a bookshelf that will fit in your closet or a birthday greeting card for your grandfather. Be on the lookout for gnomes hiding in cypress trees.
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During the American Revolution, the price of corn rose 10,000 percent, the price of wheat 14,000 percent, the price of flour 15,000 percent, and the price of beef 33,000 percent.
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