Unformatted text preview: I p = Planned investment ( i + ii above) 5. Equilibrium: Quantity supplied = Quantity demanded; y = PAE; I = I p a. If I – I p > 0, then inventory accumulation b. If I – I p < 0, then inventory depletion 6. Components of PAE a. Consumption Function i. Autonomous consumption ii. Induced consumption: c(y – T) iii. Where: c = Marginal Propensity to Consume (MPC) iv. Where:(y – T) = Disposable income b. Planned Investment, Government Spending, Net Exports i. All determined exogenously (outside of model) III: NEXT TIME A. Continue Chapter 13: “Spending and Output in the Short Run”...
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- Spring '08