ECO102H1 Lecture Notes - Lecture 4: Parsec, Consumption Function, Price Level

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17 Feb 2015
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ECO102H1 Full Course Notes
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ECO102H1 Full Course Notes
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Gdp measures: national output and, national income. [remember: we can measure gdp by either adding expenditures on output or adding the incomes earned to produce output] C + i = y where y = national income. Observations: corresponds to text, chapter 21, price level is treated as fixed [so nominal gdp equals real gdp, students should focus on economic forces that produce equilibrium [not the simple algebra] Output growth [real gross domestic product, or real gdp] [labour is a factor of production, and use of labour will fall if total output falls] Investment: firms undertake investment (i) in anticipation of earning a profit, will treat i as fixed (i = 25 in first example) C = 10 + . 9y mpc = . 9. S = y - c = y - (10 + . 9y) If there is no change in y, but c changes, result is change in autonomous consumption.

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