ECON103 Lecture Notes - Lecture 15: Cash Flow, Interest Rate, Real Interest Rate
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11 Apr 2017
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Chapter 12 aggregate expenditure and output in the short run. 12. 2 determining the level of ae in the economy. There are two major paths of study in macroeconomics: long-run economic growth and development, short-run fluctuations/business cycles. Recall, during recessions, real gdp growth slows and unemployment rises. During expansions, real gdp growth expands and unemployment falls. Aggregate expenditure (ae) model macroeconomic model that focuses on the short-run relationship between total spending and real gdp. Assumption price level is constant ( completely sticky prices ) Underlying key idea aggregate expenditure determines the level of gdp and income. Ae model is a short-run model that aims to explain economic fluctuations. 12. 2 determining the level of aggregate expenditure in the economy. Planned investment spending doesn"t include the build-up of inventories: goods that have been produced but not yet sold. Planned investment (pl) = actual investment (ai) unplanned. If unplanned change > 0, then pl < al (greater inventories than planned)