ECON 202 Lecture Notes - Lecture 5: Real Interest Rate, Aggregate Demand, Aggregate Supply
2 Apr 2017
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In the long run aggregate supply = gdp. In the short run, aggregate demand rules the roost. Total $ spent on goods and services. Ad= c + i + g + (x-im) (x-im)=net exports. Excludes new homes, these are considered investments. Sum of expenditures of firms on new tech, software etc. Difference between exports (x) and imports (im) Has been negative in the us since 1970"s. Sum of all incomes of all individuals in the economy. Excludes govt transfer payments e. g. social security, welfare, unemployment. After all taxes deducted and transfer payments paid. Di = ni taxes + transfer (taxes + transfer)=net taxes=t. Wages + interest + rent + profits = value of output, or. Sum of money that the govt gives certain people as outright grants. As disposable income increases(decreases) consumer spending increases (decreases) C/ di=180/200=. 9= mpc (marginal propensity to consume) slope of consumption function = . 9 we spend 90 cents on every dollar we have, saving 10 cents.
