ECON 102 Chapter Notes - Chapter 21: Pessimism, Equilibrium Level, Shortage
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ECON 102 Full Course Notes
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Desired/planned spending on output by households, firms, governments and foreigners. Actual expenditure does not need to equal desired (unforeseen circumstances) National income accounts measure actual expenditure in the four expenditure categories. National income theory deals with desired expenditure in each of the four categories. Autonomous expenditure: elements of expenditure that don"t change systematically with national income: changes do occur, but not in response to changes in national income. Induced expenditure: any component of expenditure that is systematically related to national income. Consumption is 55-60% of gdp and is the largest component of aggregate expenditure. Investment includes accumulation of inventories plus additions to stock/physical capital: makes up 20% of gdp, but is very volatile. Closed economy: economy that has no foreign trade in goods, services or assets (no trade) In the simplified model, disposable income ( is equal to national income (y: saving: all disposable income that is not spent on consumption.
