ECON 104 Study Guide - Moodle, Invisible Hand, Disposable And Discretionary Income
18 Jan 2014
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Worksheet 3 classical model, keynesian consumption due 2/17 in discussion section or uploaded to moodle. Classical theory still insisted unemployment was voluntary or temporary; wages would fall and things would recover. John maynard keynes was a british economist who published the general theory of. Equilibrium- wages, interest rates and prices adjust so that the equality demanded equals the quantity supplied. Leakages are income not spent; savings, taxes, and imports. Transfers of funds out of the income and spending flows. Injections are spending from borrowing government spending, investment, and exports. They are important to keynes because in order for there to be equilibrium, leakages must equal injections. Investment: occurs when the business sector creates a new capital in the form of new plants, additions to equipment, and building up inventories. Consumption: income can be either spent (consumption) or saved. As income is increased, consumption is increased by a little less: consider the following consumption function.
