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Unformatted text preview: Production minus sales. Desired, or planned, investment Those additions to capital stock and inventory that are planned by firms. Actual investment The actual amount of investment that takes place; it includes items such as unplanned changed in inventories. Planned aggregate expenditure (AE) The total amount the economy plans to spend in a given period. Equal to consumption plus planned investment AE= C + I Equilibrium Occurs when there is no tendency for change. In the macroeconomic goods market, equilibrium occurs when planned aggregate expenditure is equal to aggregate output. Multiplier The ratio of the change in the equilibrium level of output to a change in some autonomous variable. Autonomous variable A variable that is assumed not to depend on the state of the economythat is, it does not change when the economy changes. MPS = D S D Y MPS = D I D Y Y = D I 1 MPS multiplier 1 MPS multiplier 1 1-MPC...
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- Spring '05