SOUTHERN JOURNAL OF AGRICULTURAL ECONOMICS JULY, 1983 IMPACT OF FEDERAL FISCAL-MONETARY POLICY ON FARM STRUCTURE

This paper examines the impact of federal fiscal- Cost-Price Impacts monetary (FM) policy on farm structure. FM policy is multifaceted but is confined here mainly to policies in- Prices throughout the economy do not change lock-fluencing aggregate demand. Inflation is defined as an step in response to expansionary fiscal-monetary pol-increase in the general price level. Farm structure re- icy. Imperfectly competitive sectors characterized by fers to farm size and numbers, tenure, legal organiza- administered or negotiated prices might more quickly tion, investment, capital-labor ratio, productivity, and and fully pass inflated costs to other sectors than do status (part-time or full-time farming). atomistically competitive sectors such as farming. On The organization of this paper reflects that FM pol- the other hand, wage and other contracts in imper-icy primarily impacts farm structure indirectly. The fectly competitive industries might cause prices charged immediate or first-round impact on the farming indus- by firms in such industries to rise more slowly than try is primarily through cost-price, cash flow, real other prices. Inventories, biological restraints, supply wealth, and instability effects. I examine these first- and demand elasticities, and other factors also influ-round effects before analyzing their impacts on farm ence the relative and absolute response of prices by structure. The final section briefly reviews the influ- sector to an expansion in aggregate demand. Theor