ECON 1129 Study Guide - Final Guide: Taylor Rule, Classical Dichotomy, Securitization
Document Summary
Aggregate expenditure (total spending on g/s), short-run relationship between total spending and real gdp. Will only happen when there is no unplanned change in inventories. At equilibrium y = ae (planned expenditure) Difference between ae and rgdp = i means planned investment not actual investment different due to unplanned inventory investment. Actual investment = planned investment + unplanned investment. Consumption spending by households on g/s (effects with increase in c) Consumption is a function of disposable income, income rates affect consumption (increase income increase. Mpc (for every dollar of y(d), the mpc amount is spent consumption v. income), mps (for every dollar of. Y(d), the mps amount is saved saving v. income) mps + mpc = 1. Planned investment - actual i (i(a)) = planned i (i(p)) + unplanned change, spending by firms on capital goods, spending by households and firms on new houses. Investment tax credit (+) cash flows (+) optimism and pessimism of firms.