Unformatted text preview: Expenditure Multiplier ISLM Model Motivation of short-run analysis (“in the long run we are all
dead”). 1. An change in demand must lead to corresponding change in
2. Changes in nominal expenditures are changes in real variables. Keynes assumed that price level is ﬁxed: Equilibrium occurs when the total quantity produced Y
(aggregate supply) equals the total quantity demanded Y AD
Y AD = Y Determination of Aggregate Output Aggregate Output ...
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