EC120 Chapter Notes - Chapter 27: Chapter 27, Autonomous Consumption, Disposable And Discretionary Income

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23 Oct 2016
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Chapter 27 expenditure multipliers: the keynesian model. In the keynesian model we study, all firms set their prices and sell quantities customers are willing to buy. If they consistently sell a greater quantity than they plan to and are constantly running out of inventory, they eventually raise their prices, if they sell less and are piling inventory, they cut them. But on any given day prices are fixed and quantities sold depend on demand, not supply. For the economy as a whole: 1. Aggregate expenditure has four components: consumption expenditure, investment, government expenditure on goods and services, and net exports (exports minus imports) Four components sum to real gdp disposable income, other things remaining the same consumption expenditure, investment, government expenditure on goods and services, and exports minus imports. Aggregate planned expenditure equal to the sum of the planned levels of. Disposable income aggregate income minus taxes plus transfer payments. Consumption function the relationship between consumption expenditure and.

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