Textbook Notes (368,780)
Canada (162,164)
Economics (923)
ECN 204 (282)
Amy Peng (21)
Chapter 8

Chapter 8 and 9

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ECN 204
Amy Peng

Chapter 8 and 9.1; 9.2 Aggregate Expenditures Model Aggregate expenditures (AE): Total planned spending on final goods and services o Four components o Consumer expenditure (C) o Investment (I) o Government purchases (G) o Net exports (NX) Income-Consumption and Income-Saving Relationships 45 line: A reference line indicating where consumption equals disposable income. (C=DI) Consumption Schedule: A schedule showing the amounts households plan to spend for consumer goods at different levels of disposable income. Saving schedule: A schedule that shows the amounts households plan to save at different levels of disposable income. (S = DI C) o Gap in between the 45 line and the Consumption schedule Break even income: the level of disposable income at which households plan to consume all their income and to save none of it o Where Consumption schedule intersects with 45 line Consumption function Saving function Marginal propensity to consume: The fraction of any change in disposable income spent for consumer goods. Marginal propensity to save : The fraction of any change in disposable income that households save Non income determinants of Consumption and Savings o Wealth o Expectations www.notesolution.com
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