ECON 104 Lecture 13: 12 - 3rd of April - Aggregate output determination

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Department
Economics
Course
ECON 104
Professor
Ozgur Orhangazi
Semester
Spring

Description
The Aggregate Supply Curve Aggregate supply – the total supply of all goods and services in an economy The Aggregate demand curve Y = C+I+G+M-X Money Market Aggregate expenditure depends on 3 sides Consumers Firms that invest The government Interest rate affects equilibrium output because High interest discourages planned investment Planned investment is a part of planned aggregate expenditure When the interest rate rises, planned aggregate expenditure AE at every level of outcome falls Finally a decrease in planned AE lowers equilibrium outcome Y by a multiple of the initial increase in planned investment. IS curve – Relationship between aggregate output and the Interest rate With the interest rate fixed, An
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