chapter 11 - THEN AND Aggregate expenditure is equal to GDP...

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AND … Aggregate expenditure is equal to GDP inventories are unchanged the economy is in macroeconomic equilibrium . Aggregate expenditure is less than GDP inventories rise GDP and employment decrease. Aggregate Expenditure is greater than GDP inventories fall GDP and employment increase . CHAPTER 11: OUTPUT AND EXPENDITURE IN THE SHORT RUN Aggregate Expenditure Model: The key idea that we will develop is that the level of GDP is determined by the level of aggregate expenditure. AE=C+I+G+NX. Solve 1.3, pg 382 Difference between Planned and Actual Investment: Solve 1.4, pg 382 Determining Level of AE in the Economy: Consumption: Consumption is the largest component of AE and it follows a smooth, upward trend. a) Current Disposable Income b) Household wealth c) Expected future income : d) Price : e) Interest rate : Consumption Function : Marginal propensity to consume (MPC). (Graph) Disposable income = National income − Net taxes National income = GDP = Disposable income + Net taxes
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chapter 11 - THEN AND Aggregate expenditure is equal to GDP...

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