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ECON 1020 (99)
Lecture 66

ECON 1020 Lecture 66: Lecture 66

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ECON 1020
Ryan A.Compton

o982 Differential Impacts Equal changes in G and T do not have equivalent impacts on GDP Injections, Leakages and Unplanned Changes in Inventories S + M + T = I + X + G Equilibrium versus FullEmployment GDP: Recessionary expenditure gap Insufficient aggregate spending Spending below fullemployment GDP Increase G andor decrease T Inflationary Expenditure Gap Too much aggregate spending o Spending exceeds fullemployment GDP o Decrease G andor increase T Notes on Multipliers: To keep the model simple, weve ignored many real world factors that may reduce the size of the multiplier effect These forces are called automatic stabilizers Automatic Stabilizers: Taxes (weve assumed they remain constant, but they often rise with income) Transfer Payments (fall as income rises, therefore smaller rise in disposable income) Interest Rates (increased income leads to increase r) Prices Imports Math representation of AE model AE using math
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