ECON 209 Lecture Notes - Shortage, Real Interest Rate, Disposable And Discretionary Income
30 Mar 2013
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Chapter 21 the simplest short-run macro model. Desired aggregate expenditure (ae): sum of desired or planned spending on domestic output by households, firms, gov"ts, and frgnrs. Ae = c + i + g + (x im) Need not = actual expenditure in any regard. Nat"l income accts msr actual expenditures in ea of the 4 expenditure categories; nat"l income theory deals w/ desired expenditures. Autonomous expenditure: elements of aggregate expenditure that do not change systematically w/ nat"l income. Induced expenditure: any elements of expenditure that are systematically related to (vary w/) nat"l income. We consider a closed econ: no frgn trade in goods, services, or assets. We assume no gov"t and constant price level. Savings = all disposable income not spent on consumption (savings and consumption are only possible uses of disposable income) Consumption and disposable income tend to be (+) related (in the simplest model, holding constant other determinants of desired consumption)
