GDP=SUM OF ALL FINAL PRODUCTS IN
GDE (GROSS AGGREGATE DEMAND)=SUM
OF CONSUMPTION AND INVESTMENT
GDI (GROSS DOMESTIC INCOME)=WAGES+GROSS
THE 3 MEASURES ARE EQUAL:
FIRM i SALES TO
HOU SEHOLDS CON SU M P T ION
CAP IT AL
Producing Firms and Rental Firms
o Producing firms: These firms dont buy capital but rent it in the market.
Denote P (price) of the final good produced with capital and R (Rental
price of capital). Denote K (the capital stock of the firm).
Fall Term 2012
EC 302. Intermediate Macroeconomics
Problem Set 2.
1) Describe the Life-Cycle Theory of Consumption and its implications.
1. The Life-Cycle Theory of Consumption is a concept used to figure out individual