ECON 20 Lecture Notes - Lecture 18: Aggregate Demand, Fixed Investment, Business Cycle
Document Summary
Consumption statistics: consumer spending constitutes largest portion of sales. Consumption is the largest part of aggregate demand, by far. In consists of everything bought by households except new houses (these are counted as residential investment). Consumption can be divided up into "durable" and "non-durable" categories. Durables include longer-lasting goods like cars and appliances. Non-durables include food and clothing and many services. But usually we refer to consumption as a whole: trends in shares of consumption in total output. The share of consumption in demand has risen from about 62 percent in the 1960s to about 71 percent in recent years (see the graph below). Investment: a volatile component of aggregate demand: volatility of investment over the business cycle. Investment is the second major component of the economy that we will study in some detail. Investment consists of three major pieces: the largest part is non-residential fixed investment or, more simply, business investment.
