Assume a homogeneous production function, a constant rate of population growth and a monetary policy which keeps the rate of interest fixed. With initial unemployment there exists an unstable process of balanced growth. Under initial full employment there exists a natural rate of interest...

Summary: Let demand for a product be a random variable, which is independently and identically distributed in successive periods. Consider a firm producing this commodity subject to the following costs: the direct cost of production is proportional to output; the cost of changing the rate of...