ECN 204 Study Guide - Output Gap, Real Interest Rate, Aggregate Supply

Ae is planned total spending on final goods &amp; services; Ratio of change in equilibrium gdp to change in autonomous expenditure (investment spending) Changes in gdp = multiplier * initial change in spending. Rationale: spending generates income, change in income cause both consumption &amp; saving to change. Multiplier = 1 / mps = 1 / (1 j mpc) Assumptions: government purchases do not cause shift in consumption/investment schedules. N net tax revenues derived totally from personal taxes; taxes do not vary with gdp. N government spending (g is autonomous expenditure), shifts ae up = higher equilibrium gdp. 2 different policies government may pursue to close gap &amp; achieve full employment: Aggregate demand j amounts of real output that buyers collectively desire to purchase at each possible price level (inverse) Slopes downward due to these effects of change in price level: real-balances effect j inverse relationship of price &amp; real value of financial assets with fixed money value.

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Aggregate expenditure is the total amount of spending in the economy that determines the level of the GDP. Components of aggregate expenditure are autonomous expenditure, planned private investments, government expenditure, and net exports. When autonomous expenditure increases or decreases, it has a multiplier effect on the GDP.
Referring to the 10-year historical period that you chose for your final project, discuss an example of a change in autonomous spending. Research a government policy implemented during that time and discuss the multiplier effect it had on the economy.
I have chosen 1980-1989 in the US.

<div>In the keynesian model, equilibrium national income:</div>
<div>
A. Occurs when the marginal propensity to consume equals the multiplier.
B. Occurs at the point where the consumption function crosses the​ 45-degree line.
C. Equals planned​ consumption, investment,​ government, and net export expenditures.
D. Equals planned​ consumption, investment,​ government, and import expenditures.
</div>

Aggregate expenditure is the total amount of spending in the economy that determines the level of the GDP. Components of aggregate expenditure are autonomous expenditure, planned private investments, government expenditure, and net exports. When autonomous expenditure increases or decreases, it has a multiplied effect on the GDP. Referring to the 10-year historical period that you chose for your final project,( i choose Korean War and Vietnam War.). discuss an example of a change in autonomous spending. Research a government policy implemented during that time and discuss the multiplier effect it had on the economy.

ECN 204 Study Guide - Output Gap, Real Interest Rate, Aggregate Supply

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