ECN 202 Midterm: Exam 2 Cheat Sheet at URI
Document Summary
Aggregate demand: ad= c [household consumption] + i [investment expenditure - firms and households] + g [govt expenditure] + nx. [net exports x-m] is an economic measurement of the sum of all final goods and services produced in an economy, expressed as the total amount of money exchanged for those goods and services. C1= marginal propensity to consume the change in. Simple model of an economy with two sectors:households [consumption] Why are the marginal propensity to consume and import important concepts: C1= marginal propensity to consume the change in c as y changes 01. Importance of foreign markets: exports change in exports ; positively correlated increase in gdp imports change in imports ; negatively correlated increase in gdp. Wage setting curve- wage associated with each unemployment rate. Firms set prices to maximize profits nominal wage is a production cost (w) and is also set to maximize profits. W/p associated with profits maximizing price set by firm-independent of employment level (w/p)