econ162b_42308

econ162b_42308 - B= MPC Yd= Disposable Income o Y-T MPC=...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
23/04/2008 10:03:00 Classical Model- Say’s Law Spending adjusts to output Keynesian Model: Output adjusts to spending  Keynesian critique: 1) Wages, prices, and interest rates maybe sticky 2) Money illusions may exist 3) Business confidence is important 4) Importance of expenditures 5) Role for Government 6) Short run fluctuations Fixed Keynesian Model Assumptions: 1) Rational Self-Interest 2) Prices are fixed (short run) 3) Consumption spending depends on income 4) I,G, (X-M) are fixed 5) Taxes= 0 Consumption Function- a model that shows the relationship between  consumption spending and disposable income C= Consumption spending C0= Autonomous consumption spending
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 4
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: B= MPC Yd= Disposable Income o Y-T MPC= Marginal Propensity to Consume o C o Yd 0<MPC<1 Equation for Consumption Function C= Co= bYd o Co= Vertical intercept o b= slope Saving Function S= Yd-C S= Yd- (Co+bYd) o S= Yd- Co- bYd S= Co+ (1-b)Yd o C0= Autonomous dissaving Amount youre consuming at 0 income, which must be coming from your savings o (1-b) is the MPS which is the Marginal Propensity to Save. MPC= MPS- 1 Keynesian Equilibirum Y= AE Y= output (GDP) AE= spending o Assume T-G Yd-Y 23/04/2008 10:03:00 23/04/2008 10:03:00...
View Full Document

Page1 / 4

econ162b_42308 - B= MPC Yd= Disposable Income o Y-T MPC=...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online