ECO102H1 Lecture Notes - Lecture 5: Parsec, Glossary Of Partner Dance Terms, Aggregate Demand
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ECO102H1 Full Course Notes
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Potential gdp = level of gdp if all factors of production are fully employed. Smooth fluctuations and stabilize gdp close to y* Changes to net tax rates or government spending to shift the ae curve and move yeq. Developed a model of aggregate expenditures: autonomous vs. induced expenditures, the multiplier effect, changes in real gdp determined by changes in ae. Introduce the supply side: resource constraints on y. May not be possible to increase y to ae. If y > y*: to decrease y, can decrease g or increase t, if decreases g: Ae decreases, yeq decreases change in yeq = change in g x multiplier: if increase t: decrease in yeq, c decreases, ae decreases change in yeq = change in c x multiplier. Demand and supply in in quantity/price space: price is the price level (all prices, quantity is the output (real gdp) There is an aggregate demand and aggregate supply curve to determine equilibrium.
