ECO102H1 Chapter Notes - Chapter 21, 22: National Income And Product Accounts, Real Interest Rate, Disposable And Discretionary Income
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ECO102H1 Full Course Notes
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Document Summary
Desired aggregate expenditure (ae) - the sum of desired or planned spending on domestic output by households, firms, governments, and foreigners. National income accounts measure actual expenditures in each of the 4 expenditure categories. Our model of the macro economy also deals with desired expenditures in each of the 4 categories. Autonomous expenditure - elements of expenditure that do not change systematically with national income: these components do not depend on national income. Induced expenditures - any component of expenditure that is systematically related to national income: these components do change in response to changes in national income. Important simplifications: there is no trade with other countries aka it is a closed economy, there is no government aka no tax, the price level is constant. Saving - all disposable income that is not spent on consumption. There are only 2 possible uses of disposable income - consumption and saving.
