econ101fall11lecture6

econ101fall11lecture6 - Aggregate Demand & Aggregate...

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Aggregate Demand & Aggregate Supply Analysis Required Readings • Chapter 8, pp. 155-159 • Chapter 9, pp. 174-176 & 185 • Chapter 10, pp. 193-199
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Motivation • Previous Model: Unable to analyze the effects on C+I of the Decline in Housing prices and the Financial Crisis • Relax the assumption of “ Completely Slack Conditions • Expand the analytical framework to allow both P and Y to vary
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Objective Derive the Aggregate Demand Curve AD = Aggregate Demand Curve
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Consumption Function depends on: OTE: Real Income Consumption Expenditure OTE: Real Wealth Consumption Expenditure OTE means "Othe Real Consumption Expenditure Real (Disposable) Income Real Wealth  r Things Equal"
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Wealth Assets (Items People Own): Financial Assets : Money Stocks Bonds CDs Saving Deposits Mutual Funds Money Market Funds Etc Durable Goods Assets : Current Value of House Current Value of Cars Current Value of Furniture Current Value of Art Work Current Value of Vacation Home Etc
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econ101fall11lecture6 - Aggregate Demand & Aggregate...

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