ECON1132 Lecture 6: Lecture 6 Spring 2014.pdf

20 views8 pages
24 Feb 2014
Department
Course

Document Summary

Lecture 6: fiscal policy in the keynesian multiplier model. Let"s begin by reviewing the diagrams we used last time. We had a simple model with just two components of spending, consumption and. Output is determined by total spending, subject to an upper limit of q*. We show the equilibrium with the 45-degree line diagram and also with the as-ad diagram. The first is sometimes called the keynesian cross: it shows equilibrium as an intersection of c+i with q. This one shows equilibrium as the intersection of ad with as. In both cases we show equilibrium at q = 900. We also looked at the system in terms of the circular flow diagram. On the circular flow diagram, we see firms producing the goods in response to ad (c+i). The income from production flows to households as. Di, and in turn is spent (c) or is saved (s). The c spending flows right back to the firms.

Get access

Grade+20% off
$8 USD/m$10 USD/m
Billed $96 USD annually
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
40 Verified Answers
Class+
$8 USD/m
Billed $96 USD annually
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
30 Verified Answers

Related Documents