ECON 3430 Lecture Notes - Lecture 17: Economic Equilibrium, Negative Relationship, Inventory Investment
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ECON 3430 Full Course Notes
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The total amount of spending on domestically produced goods and services that households, businesses, the government, and foreigners want to make. The total amount of output demanded in the economy. The total quantity demanded of an economy"s output is the sum of 4 types of spending: Yad = c + i + g + nx. The relationship between disposable income yd and consumption expenditure. C = ca + mpc x (y t) The term mpc is the marginal propensity to consume. Change in consumption expenditure that results from an additional dollar of disposable income. Planned spending on equipment, structures, and also s-pending on new residential housing. Smaller than fixed investment, but can be unplanned. Investments depend on the real interest rate since a new project must yield at least as high a return as the interest rate (cost of borrowing) Some investment is not sensitive to the interest rate, this is called autonomous investment.