ECO202Y5 Lecture Notes - Lecture 3: Fiscal Policy, Business Cycle
Document Summary
Circles: start from small and grow over time. G=> example: road improvements by miller group (4 billion) to production= g= production= worker jobs= incomes= consumption (miller workers) The 4 billion that is initially invested to miller group by the government is slowly helping out the other people such as public consumers. Workers will save some of the salary and consume the left over. The amount of money spent by the workers will become the salesman"s income. When the salesman income increase, their consumption will increase too. However this will investment will slowly die off, just like the ripple effect. 3. 2 billion x (0. 8)=2. 6 billion and so on . Mpc -> dictates how much money is being put back in the economy. When you move along the curve, it only show changes in z and y. When you move the entire curve, it show changes from y. Another way to think about equilibrium is the goods market:
