1 / 12

CHAPTER 12

CHAPTER 12. Measuring Economic Activity. Chapter Outline. Components of aggregate expenditures C + I + G + (X-M) Personal Consumption Expenditures (C) Factors affecting consumption Relation between consumption and income MPC, MPS Gross Private Domestic Investment (I)

ember
Télécharger la présentation

CHAPTER 12

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. CHAPTER 12 Measuring Economic Activity

  2. Chapter Outline • Components of aggregate expenditures C + I + G + (X-M) • Personal Consumption Expenditures (C) • Factors affecting consumption • Relation between consumption and income • MPC, MPS • Gross Private Domestic Investment (I) • Factors affecting (I) • Investment function

  3. Chapter Outline Cont… • Government Expenditures • Fiscal Policy • Government function • Net Exports • Exports, Imports and net exports function • Aggregate expenditure function • Equilibrium level of income and output • Changes in equilibrium

  4. Short-run Model Y= C + I + G + (X-M) ~ open economy Y= C + I + G ~ Keynesian framework • The Focus is on the short-run. “In the long-run, we are all dead” -Keynes • The theory was developed after the Great Depression

  5. Consumption Function Factors affecting personal consumption C= f[ Y, Tp,r, CC, W, CR, D] Y= disposable income Tp= personal taxes r = real interest rate CC = consumer confidence W = wealth CR = availability of consumer credit How are these Variables related to consumption?

  6. C C C C MPC = < 1 Y Y C

  7. Gross Private Domestic Investment Keynes assumed autonomous Investment Autonomous Investment Induced Investment C I I I Y Y

  8. Government Expenditures G Autonomous Government Expenditures G Y

  9. Net exports & Currency exchange rate N= [ E-M] Exports – Autonomous Imports – a funtion of domestic real Imports Exports m M= M0 + m1Y M

  10. Aggregate Expenditures C + I + G + (X-M) Y Assumes that consumption is the only component that varies with income. Equilibrium= E=Y Agg. Exp=Agg. output E A E 45o Y O Planned and unplanned inventories

  11. Change in Equilibrium Y E2 B E1 A I O Y Y

  12. Multiplier • Relation between change in investment and change in income M= Y Multiplier can be defined as : m= 1/1-MPC I Y = m * I

More Related