ECON 1100 Lecture 5: ECON 1100 - 5 - Chapter 8 - part 1.pdf

• School: University of Guelph
• Department: Economics
• Course: ECON 1100
• Professor: Kosemple

Document Summary

Determining the level of aggregate expenditure in the economy. Understand how macroeconomic equilibrium is determined in the aggregate expenditure model. Aggregate expenditure (keynesian) model a macroeconomic model that focuses on the short-run relationship between total spending and real gdp, assuming that the price level is constant. In 1936, the british economist john maynard keynes published a book, the. General theory of employment, interest, and money, that systematically analyzed the relationship between changes in aggregate expenditure and changes in gdp. Key assumption: in the short run, firms meet the demand for their products at preset prices. Assuming a fix price is equivalent to having a supply curve that is horizontal. With a horizontal supply curve, the position of the demand curve will determine the amount of output produced and sold. To answer this questions we must look at the expenditures of the different agents within the economy. Ae: is total planned spending on final goods and services.