EC140 Lecture Notes - Lecture 3: Disposable And Discretionary Income, Consumption Function, Expenditure Function
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EC140 Full Course Notes
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The actual values of the various categories of expenditure are indicated by ca, ia, ga and (xa-ima) The su(cid:271)s(cid:272)ript (cid:862)a(cid:863) is to i(cid:374)di(cid:272)ate the desired e(cid:454)pe(cid:374)diture i(cid:374) the sa(cid:373)e (cid:272)ategories: desired consumption c, desired investment i, desired government purchases g, desired net exports (x-im) Desired expenditure what consumers and firms would like to purchase, given their real-world constraints of income and market prices. Desired aggregate expenditure the sum of desired/planned spending on domestic output by households, firms, governments, and foreigners. Autonomous expenditures elements of expenditure that so not change systematically with national oncome. Induced expenditure and component of expenditure that is systematically related to national income. There is no trade with other countries the economy we are studying is a closed economy. There is no government no taxes. Relationship between desired and consumption expenditure and all variables that determine it. The relationship between desired consumption expenditure and disposable income: key factors that influence desired income are:
