[ECON 100B] - Midterm Exam Guide - Everything you need to know! (15 pages long)
Document Summary
When economistst think about year to year economic activity they think about interactions between production, income, and demand. Consumption = good and services purchased by consumers. We have no idea how the government plans to spend its money, government spending is unpredictable. If exports > imports = trade surplus; if imports > exports = trade de cit. Inventory investment = difference between production and sales. Z = c + i + g + x - im, this equation represents the total demand for goods z as consumption. + investment + government + exports - imports. In a closed economy exports will equal imports so the demand equation will be represented as z = c+ i + g. Consumption is a function of our income, how much humans consume are correlated to how much money we are able to make. Consumption is represented by the equation c = c0 + c1(yd)
