The Nonfinancial Business Sector in the Simple Model

  • Harland Wm. WhitmoreJr.


The nonfinancial business sector presumably formulates its plans at time t so as to maximize its present value. Because the number of its equity shares outstanding at time t is given, this objective is tantamount to maximizing the price which those people who hold its shares at time t could receive for their shares if they were to sell them at time t. But, since all households are viewed as belonging to a single decision-making unit, any trading in existing shares at time t among households presumably fails to affect aggregate behavior. Consequently in this model the price of an existing share at time t remains a shadow price.


Current Period Business Sector Consumption Good Marginal Revenue Wage Bill 
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Copyright information

© Springer-Verlag Berlin Heidelberg 1986

Authors and Affiliations

  • Harland Wm. WhitmoreJr.
    • 1
  1. 1.Department of EconomicsUniversity of CincinnatiCincinnatiUSA

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