Chapter 11 Notes- Aggregate Expenditures Model PDF

Preview

Summary

-Keynesian
-Factors of Equilibrium GDP
-Say's Law VS Keynes...

Description

Economics*1020*14 Professor Krayewsky Chapter 11- The Aggregate Expenditures Model Keynesian aggregate expenditures expenditures model  Prices are fixed  GDP = DI  Consists of private sectors: households & businesses

Factors of Equilibrium GDP  Saving = planned investment o Saving is a leakage of spending into economy o Investment is an injection of saving into economy  No planned changed in inventory o Firms don’t change production Adding International Trade  Include net exports spending in aggregate expenditures o Private, open economy o Exports create production, employment, and income o Subtract spending on imports o Xn can be positive or negative

Say’s Law -classical economics -economy will automatically adjust -Laissez-Faire

VS.

Keynes -Keynesian economics -cyclical unemployment can occur -economy won’t correct itself -government should actively manage macroeconomic instability...