ECON 102 Chapter Notes - Chapter 11,12: Final Good, Fiscal Policy, Aggregate Supply
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ECON 102 Full Course Notes
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Multiplier = 1/ (1- mpc: only when we go by the assumption that t and tr are both 0. Stagflation: rising unemployment is coupled by high inflation rates. Gdp: measures aggregate output, horizontal axis. Wealth effect: changes in aggregate price level change the purchasing power of all consumers. Interest rate effect: when purchasing power decreases people try to increase the amount of money they have by charging higher interest rates which leads to less investment: shifters, change in expectations. Pessimistic decrease spending: change in wealth. Change in value of assets changes purchasing power: size of existing stock of physical capital. Have more need less decrease demand: the government can have an impact of aggregate demand. Fiscal policy: use spending on final goods or taxing/transfers to increase or decrease demand. Monetary policy: use the quantity of money or interest rate to increase or decrease demand. This model drops the assumption of the income-expenditure model that aggregate price level is fixed.
