Statics Dynamics and Comparative Statics by chafzal33

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deceleration is the essence of Harrodian Dynamics. His point can be
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Let us assume that OF is the level of full of employment. Starting with
the income level at A for the time interval at Ot1, the rate of growth is
zero. The study of the economy from point A to B, according to Harrod,
is static. With the push up of the economy, the income level rises from
B to C at the time interval Ot2. According to Harrod, the dotted path
between B and C is the subject matter of economic dynamics because,
during this interval, the rate of change of income is itself undergoing a
change. The rate of growth again becomes zero and analysis of the
economy becomes static when moving from point C to D.

Ragnar Frisch has broadened the vistas of economic dynamics. According
to him, economic dynamics is the process of change, and should embody
functional relationships of variables with different dates appended to
them. Frish’s definition of economic dynamics takes care of the past
values of the several variables, their lags, sequences, rates of change
and cumulative magnitudes, etc.

Sameulson’s definition of economic dynamics states that the essence of
dynamics that economic variables at different points of time are
functionally related including velocities, acceleration, or higher
derivatives. His definition of economic dynamics includes the phenomena
of cyclical growth, cyclical fluctuations, speculation, cob-web theorems
of price determinations, stagnation thesis, perspective planning, etc.

Comparative Statics:
Comparative statics is a cross of statics and dynamics. In comparative
statics, we study the change from one equilibrium position to another as
a result of changes in parameters. It helps us to know the direction and
magnitude of changes in the variable when certain date change, so as to
cause a movement to a new equilibrium position. Professor J.M. Keynes
based his technique of shifting equilibrium on comparative statics. The
Keynesian model predicts that an upward shift in the investment function
with cause a rise in the level of income, a rise in the level of saving,
and a rise in the rate of interest. At original level of income,
investment exceeds saving. Equilibrium is restored by the rise in saving
resulting from the rise of income, and by the fall in investment
resulting from the rise in interest rates. Similarly, the Keynesian
theory predicts that a fall in the transactions demand for cash will
cause a rise in income, a fall in interest rates and a rise in saving and
investment. Also, a downward revision in expectations about the future
interest rates will lower the rate, rise income and raise saving and
investment. Such are the shifts that Keynes studies with the aid of
comparative statics.

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