Two zone acceleration effect

[Greg Nowell <GN842@xxxxxxxxxxxxxxxxx>]

Consider investment as a component of aggregate
income.  Assuming some arbitrary measure of GDP,  the
situation in case no. 1 might be

Y = I + C or, in geographic zone #1,
100= 20 + 80.

No consider zone #2
Y=I +C
or 100=50+50.

Zone #2 exports heavily to zone #1.  Zone #1's growth
is steady but does not provide enough growth in
consumption to outpace Zone #2's acceleration effect.

1.  Would it not be the case that zone #2 would be more
prone to imbalances attributable to the "acceleration
effect" than zone #1, lacking as it were, its own
component of "stabilizing demand"?

2.  Would it imply geographic disparities in employment
based on the distribution of consumption?

3.  Would it imply that the value of assets (and by
implication the liquidity of the banking system) be
more volatile in the zone with the higher dependency on
investment as a component of Y?

4.  Is it a possible explanation for an Asian
super-boom which lasts about 15 years and then goes
superbust?  A small part of explanation or a big one?

--
Gregory P. Nowell
Associate Professor
Department of Political Science, Milne 100
State University of New York
135 Western Ave.
Albany, New York 12222

Fax 518-442-5298