ECO100Y5 Chapter Notes - Chapter 21: Real Interest Rate, National Income And Product Accounts, Consumption Function
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ECO100Y5 Full Course Notes
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In this chapter, we are concerned with a different concept. Desired expenditure refers to what people desire to spend out of the resources that have. Using ca, ia, ga, and (xa-ima) -> we use c,i,g and (x-im) to represent the desired expenditure. The sum of desired expenditures on domestically produced output is called desired aggregate expenditure, ae. National income accounts measure actual expenditures in each of the four expenditure categories. National income theory deals with desired expenditures in each of the four categories. These categories are: domestic output by households, firms, governments, and foreign purchasers of domestically produced commodities. Actual and desired expenditures don"t have to equal. Autonomous expenditures can and do change, but such changes don"t occur systematically in response to changes in national income. Components of aggregate expenditure that do change systematically in response to changes in national income are called induced expenditures.
