ECO100Y5 Lecture Notes - Lecture 31: Autonomous Consumption, Cash Flow, Government Spending
sophiapham192 and 37296 others unlocked
53
ECO100Y5 Full Course Notes
Verified Note
53 documents
Document Summary
Eco100-introduction to economics-lecture 31 : the aggregate expenditure model. A macroeconomic model that focuses on the short run ( holding price level constant ) relationship between total spending and rgdp. In any given year, rgdp is determined by the level of spending ( ae ) in an economy. Desired level of planned ae=consumer spending + planned investment spending + Consumption is a function of disposable income ( yd). Change in yd=change in c + change in s. Y=c+s+t assume no change in net taxes. Change in y = change in c + change in s + change in t (equals 0)=change in yd. Change in c/ change in y=marginal propensity to consume (mpc) fraction of a change in yd that is used for consumption. ( slope of consumption function) Change in c/ change in y =marginal propensity to save (mps) Actual investment may be different than planned investment because of inventories.