PSY-0013 Study Guide - Final Guide: Menu Cost, Money Supply, Potential Output
10 Apr 2014
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Total income = sum of wages, interest, rent, and profit = total expenditure. Total value of production equals total value of income because all expenditure on goods/services must appear as someone"s income. If inflation in us lower, then prices of us products increase slower than other countries. When incomes in us rise more slowly than in other countries, net exports rise. As value of us dollar rises, foreign currency price of us products rise, and dollar price of foreign products sold in. Us falls (if us dollar value high, then more imports) Effect smaller when tax rates higher or marginal propensity to import (mpi) higher. An increase in autonomous expenditure leads to a larger increase in real gdp. Aggregate expenditure: increases when prices fall and decreases when prices rise (effects equilibrium between ae & gdp) Change in price = move along curve.
