Department of Economics Fall 2009 University of California Economics 100B Berkeley Professor Olney THINGS YOU SHOULD KNOW FROM ECONOMICS 1 1. GDP is simultaneously a measure of aggregate output and aggregate income. 2. The unemployment rate is not a perfect indicator of the "unemployment problem." 3. In the Keynesian model, Planned Expenditures (or, Aggregate Demand) is equal to Aggregate Demand = C + I + G + NX 4. Macroeconomic equilibrium in the Keynesian model is characterized by the existence of a level of aggregate output (which equals aggregate income) such that aggregate output = aggregate expenditures. Using the notation, macroeconomic equilibrium is the level of Y such that Y = C + I + G + NX. 5. The process of adjustment to macroeconomic equilibrium is an output adjustment process. 6. Consumption (C) increases with disposable income (Y D ), though the change in consumption is generally less than the corresponding change in disposable income. That is, C = C0 + C y @ Y D , where C
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