ECO102H1 Lecture Notes - Lecture 8: Autarky, Open Economy, Autonomous Consumption
26 Feb 2019
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ECO102H1 Lecture Notes - Lecture 7: Disposable And Discretionary Income, Consumption Function, Redistribution Of Income And Wealth
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ECO102H1 Lecture Notes - Lecture 8: Autarky, Open Economy, Autonomous Consumption
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ECO102H1 Lecture Notes - Lecture 9: Fiscal Policy, Stagflation, Government Budget Balance
Document Summary
Every round of income expansion, there is a money not spend back on domestic output. In general the format of the multiplier is . If y= c + i + g + nx ( open economy) The multiplier of an open economy is smaller than that of an closed economy. The bigger the mpc, the steeper (more vertical the curve) For the same change in aas, the steeper curve will shift but the change in y will be bigger. Because the multiplier is bigger (savings is less), there is a bigger change. Equilibrium output is determined by the intersection of the aep and the 45 degree line (when yd=aep) No supply no demand in determining the equilibrium. In a price and output graph, as= perfectly elastic. As ad changes, we have new equilibrium output, but the same price level. Supply and demand determine the equilibrium y and p.
