ECON 1100 Chapter Notes - Chapter 8: Macroeconomic Model, Potential Output, Consumption Function

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Chapter 8 - aggregate expenditure & output in the sho. Aggregate expenditure (ae) - total spending in the economy: the sum of consumption, planned investment, government purchases, and net exports. Aggregate expenditure model - a macroeconomic model that focuses on the short- run relationship between total spending and real gdp, assuming that the price level is constant. Key idea of aggregate expenditure model is that in any particular year, level of real. Gdp is determined mainly by the level of aggregate expenditure. Planned spending by firms on capital goods and by households on new homes. Spending by local, provincial, and federal government on goods and services. Spending by foreign firms and households on goods and services produced in canada minus spending by canadian firms and households on foreign produced goods and services. Macroeconomic equilibrium occurs where total spending (planned aggregate expenditure) equals total production (gdp).

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