1 / 15

Eco 200 – Principles of Macroeconomics

Eco 200 – Principles of Macroeconomics. Chapter 11: Income and Expenditures Equilibrium. Keynesian equilibrium. Fixed price level Output adjusts to achieve equilibrium AE > Y  output rises AE < Y  output falls AE = Y  equilibrium. Equilibrium. Macroeconomic equilibrium.

ankti
Download Presentation

Eco 200 – Principles of Macroeconomics

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Eco 200 – Principles of Macroeconomics Chapter 11: Income and Expenditures Equilibrium

  2. Keynesian equilibrium • Fixed price level • Output adjusts to achieve equilibrium • AE > Y  output rises • AE < Y  output falls • AE = Y  equilibrium

  3. Equilibrium

  4. Macroeconomic equilibrium

  5. Macroeconomic equilibrium

  6. Macroeconomic equilibrium

  7. Leakages and injections • Y= C + I + G + Ex-Im • Y = C + S + T (T=taxes) • equilibrium: • C+I+G+Ex-Im = C+S+T • I+G+Ex = S+T+IM • injections = leakages

  8. Leakages and Injections

  9. Multiplier

  10. Multiplier • Increase in AE results in larger increase in equilibrium output • For example, • rise in G leads to higher income • resulting in higher C • resulting in higher income • etc.

  11. Multiplier • Spending multiplier: 1/(MPS + MPI)

  12. GDP gap and multiplier • GDP gap = potential real GDP – actual real GDP • Recessionary gap = GDP gap / multiplier

  13. Real-world complications • price level effects • endogenous taxes • foreign trade repercussions

  14. AE and AD • As price level rises, C, I, and X decline due to: • wealth effect • interest-rate effect, and • international trade effect.

  15. AE and AD

More Related