ECO102H1 Lecture Notes - Economic Equilibrium, Autonomous Consumption, Aggregate Demand

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14 Apr 2014
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ECO102H1 Full Course Notes
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ECO102H1 Full Course Notes
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Irrespective of the national income vs respective. Direct relationship between autonomous expenditure and the equilibrium. Changes in real gdp were determined by changes in ae. Equivalently, changes in in y are demand determined . What demand is when prices are fixed. In recession, policy should work to increase demand. When y does not equal to y* What if there are resource constraints? (supply concerns) Must consider the supply side of the economy. Allow price level to change as well: micro vs. macro economics. Shows how desired aggregate expenditures change as the price level changes. Represents every point where ae intersects the 45 degree line. Shows how, in the short run, the supply of output changes as the price level changes. Assumptions: change in the price aren"t about input prices but output prices: aggregate demand (ad) & ae, & the price level. Ae and ad curves contain the same information, plotted in different spaces.

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