The Nonfinancial Business Sector in the Expanded Model

The model of the nonfinancial business sector presented in this chapter extends the one developed in Chapter 4 by allowing the sector to produce capital goods as well as consumption goods. Consequently in addition to the decisions confronting it in Chapter 4, the sector now must determine (at least tentatively) how many capital goods it will produce in both the current and next periods as well as how many of the capital goods it produces this period it will sell to the household or government sectors and how many it will acquire itself in order to facilitate next period’s production.