Abstract

In this paper, the balanced growth solution and relative stability of solution on Hua’s macroeconomic model is studied. Firstly, by deriving the greatest eigenvalue and nonnegative eigenvector, and analyzing the range of the eigenvalue of nonnegative matrix, the existence of the balanced growth solution on a sort of Hua’s macroeconomic model is proved, no matter whether direct consumption coefficient matrix is irreducible or reducible. Furthermore, the concept of balanced solution’s relative stability is introduced to Hua’s macroeconomic model and the necessary and sufficient condition for the existence of these solutions is obtained. Finally, based on the price equation proposed by Prof. Hua, the dynamic price system which is inclusive of the interest rate is proposed and the relationship between price and output on the basis of the relative stability of price system is illuminated.