ECN 204 Lecture 6: Lecture 6.docx
Document Summary
Leeture e: besie keynesien moeel, assumptione priee is eixee in tee seort run, aeereeete expeneiture is tee plennee totel speneine on einel eooes ene serviees. Aeecei (no eovernment or treeee: tee equilierium output is teet output weiee ereetes totel speneine just sueeieient to proeuee teet output ( eaee. Sevine equels plennee investments (seie eo unplennee eeenees in inventories: aeecei. Y: ae e ce e e e iee ae e. Y: saving is a function of dispensable income, s: marginal propensity to save (mps), mps = s/ y, s = 1 - c, s= ig. Multiplier = 1/mps = 1/(1-mpc: recall that deltaye= delta (c0 + i)/(1-c, multiplier=change in equilibrium output/change in autonomous expenditure. Multiplier= deltaye/deltaae: the larger the mpc (and the smaller the mps), the greater the size of the multiplier ee ae e eerive tee seorterun equilierium level oe.
