AGGREGATE DEMAND AND AGGREGATE SUPPLY
273
In developing countries, working capital
finance is crucial for doing business. It is
required to make payments in advance for the
services of inputs once a production process
is initiated. Suppliers of inputs to firms are
often financially constrained and cannot wait
for payments to be made after the production
cycle has been completed.*
If inputs uniformly precede outputs by a
period of
T
units of time, labour services and
capital stock that are introduced into the
production process at time
t
will account
for a finished output at time
t
+
T
. Workers
then have to be paid in advance ...
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