ECN 211 L10 AD_BB

ECN 211 L10 AD_BB - ECN 211 Macroeconomic Principles L10...

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05/11/09 1 ECN 211 Macroeconomic Principles L10 Aggregate Demand
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05/11/09 2 Aggregate Demand Curve The aggregate demand curve (AD) expresses the relationship between the ________ and __________________________ (total spending). We are aggregating across all markets now….
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05/11/09 3 Aggregate Demand Aggregate Expenditures : Households : Businesses : International Sector : Government : AD = AD =
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05/11/09 4 Determinants of Consumption Income If incomes ___________ leads to an __________in consumption. Have the ability/want to purchase more of all goods at any given price level “consumption” is a normal good. » Inferior goods are dominated by normal goods in the aggregate. Note: income is a flow concept.
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05/11/09 5 Wealth If household wealth ________________ then consumption will __________________ Wealth is a stock concept. Stock of assets e.g. homes, stocks, bonds.
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05/11/09 6 Expectations Expectations on future income/wealth. “consumer confidence”. If consumers believe future income will fall (recession) then they will reduce consumption today
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05/11/09 7 Demographics Population growth _________ in the population (increase in the number of buyers) will lead to an __________ in consumption. Population mix Young households and older households tend to have a ___________ marginal propensity to consume. “Middle-aged people tend to save more”
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8 Taxes Changes in taxes change households disposable (after tax) income. Also affect the leisure/work decision. Therefore
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ECN 211 L10 AD_BB - ECN 211 Macroeconomic Principles L10...

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