16466 Chapter Notes - Chapter 14: John Maynard Keynes, Ceteris Paribus, Keynesian Revolution
Document Summary
Economics for today a simple model of the macro economy chapter 14. Classical school of economics: adam smith: founder of the classical school of economics. Supply and demand would achieve automatic full employment because flexible prices (including wages and interest rates)in competitive markets brings all markets into equilibrium. A continuing recession was impossible because private markets and the operation of the price mechanism would eliminate persistent shortages or surpluses of products or factorsthrough adjustment. Introducing the keynesian revolution: but even after four years (1929 1933) or more, markets were not correcting in the great. Economic determinants of the four key expenditure components: aggregate demand is the sum of, total consumption spending, total investment spending, total government spending, net exports, remember: this is also the formula of gdp. Investment demand (i) spending by business firms on equipment, assets & inventory. Is the most volatile component as it is future-oriented and risky. Expectations firms have of future key influences.
