ECN 204 Chapter Notes - Chapter 11: Autarky, Real Interest Rate, Xm Satellite Radio
Document Summary
11. 1 the aggregate expenditures model: consumpion and saving. Gdp = di: for instance, if billion of output is produced as gdp, households will receive exactly billion of disposable income that they can then consume or save. Begin with private, closed economy: consumpion spending, investment spending. In the private closed economy, the two components of aggregate expenditures are consumpion, c, and gross investment, ig: aggregate expenditures the total amount spent for inal goods and services in an economy. To add the investment decisions of businesses to the consumpion plans of households, we need to construct an investment schedule showing the amounts business irms collecively intend to invest their planned investment. 11. 3 equilibrium gdp: c + ig = gdp. Unplanned changes in inventories = saving investment: negaive = increase in employment, output, and income, 0 = equilibrium, posiive = decrease. Equilibrium gdp is determined where the aggregate expenditures schedule intersects the 45 line, in this case at billion.