ECON102 Chapter 27: 27

• School: University of Waterloo
• Department: Economics
• Course: ECON102
• Professor: Maria Viola

Document Summary

Fixed prices and expenditure plans: planned aggregate expenditure. Keynesian model describes the economy in the very short run when prices are fixed. Fixed prices have two implications for the economy as a whole: Because each firm"s price is fixed, the price level is fixed. Because demand determines the quantities that each firm sells, aggregate demand determines the aggregate quantity of. 2. goods and services sold, which equals real gdp. Ae = c + i + g + x. Aggregate planned expenditure is planned consumption expenditure plus planned investment plus planned government expenditure plus planned exports minus planned imports. Autonomous expenditures (variables influenced by real gdp): c, 1m. Induced expenditures (variables not influenced by real gdp): 1, g, ex. C= a+b(y-t) is an equation of a straight line with slope b. A is called autonomous consumption: consumption taking place if 0 current income. The slope,b is called the marginal propensity to consume from income (mpc) 0