ECON102 Chapter Notes - Chapter Lecture 11-12: Government Spending, Business Cycle, Potential Output

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15 Sep 2018
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ECON102 Full Course Notes
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ECON102 Full Course Notes
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Chapter 9: continuing aggregate supply: review from last class: if the output in the economy increases, therefore more employment and less unemployment. Determining equilibrium output using the 45 degree line of aggregate expenditure: above the equilibrium: when the output (y) is greater than the aggregate expenditure (ae), then there is a surplus of unsold items. The surplus items are accumulated to the inventory. Therefore, the production by factories increases until we reach equilibrium: at the equilibrium: supply (y) = aggregate demand (ae) Ae (aggregate expenditure): what people want to buy: the black circle in the intersection of 45 degree line and the aggregate. The opposite of this would happen for a scenario that is above the equilibrium. T (lump sum tax: fixed amount of tax, does not depend on an individual"s incomes): 10. Make sure you plug the numbers in properly, it is a common mistake on exams.

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