MGEA05H3 Chapter Notes - Chapter 21: Real Interest Rate, National Income And Product Accounts, Disposable And Discretionary Income

• School: UTSC
• Department: Economics for Management Studies
• Course: MGEA05H3
• Professor: Michael H O

Document Summary

The sum of desired or planned spending on domestic output by: households, firms, government, foreign purchasers of domestically produced commodities (net exports) Does not have to equal actual expenditure, either in total or individual category) National income accounts actual expenditures, while the macro model deals with the desired expenditures (cid:1)(cid:2) = (cid:4) + (cid:6) + (cid:7) + (cid:8)(cid:9) Autonomous expenditures: elements of expenditure that do not depend on the level of national income, basic survival needs present even when disposable income is 0, y-intercept of the consumption function. Induced expenditures: elements of expenditure that do depend on the level of national income. Induced by a change in income: slope of the consumption function. Closed economy no trade with other countries in goods, services, or assets. In this simple macro model where there is no government, disposable income is equal to national income (y) The consumption function (cid:10)(cid:11) = (cid:12)(cid:13)(cid:14)(cid:15)(cid:16)(cid:17)(cid:18)(cid:19)(cid:20)(cid:13)(cid:14) (cid:22)(cid:4)(cid:23) + (cid:15)(cid:24)(cid:25)(cid:20)(cid:14)(cid:26)(cid:15) (cid:22)(cid:27)(cid:23)