ECO102H1 Chapter Notes - Chapter 21: National Income And Product Accounts, Consumption Function, Disposable And Discretionary Income
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ECO102H1 Full Course Notes
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Document Summary
Desired expenditure refers to what people desire to spend out of the resources that they actually have (not imaginary circumstances). 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 four expenditure categories. National income theory deals with desired expenditures in each of these four categories. Autonomous expenditure: elements of expenditure that do not change systematically with national income: these expenditures can and do change, but the changes aren"t systematic to changes in national income. Induced expenditure: any component of expenditure that is systematically related to national income. Consumption is typically between 55-60% of gdp (largest component of aggregate expenditure). Investment includes the accumulation of inventories plus expenditure on new machines or factories, which add to the stock of physical capital: it is typically 20% of gdp.
