macroeconomics n.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
macroeconomics PowerPoint Presentation
Download Presentation
macroeconomics

Loading in 2 Seconds...

play fullscreen
1 / 10

macroeconomics - PowerPoint PPT Presentation


  • 141 Views
  • Uploaded on

macroeconomics. National Income – a Simple Equilibrium Model. Think a “regular” market There are curves (demand, supply), or functions And t here is equilibrium GDP we talked about last time is equilibrium Call it ACTUAL We can think about FUNCTIONS of national income

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'macroeconomics' - wells


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.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
macroeconomics

macroeconomics

National Income – a Simple Equilibrium Model

slide2

Think a “regular” market

    • There are curves (demand, supply), or functions
    • And there is equilibrium
  • GDP we talked about last time is equilibrium
    • Call it ACTUAL
  • We can think about FUNCTIONS of national income
    • Call it DESIRED, or PLANNED
    • Ya = Ca + Ia + Ga + Nxa
    • Desired aggregate expenditure AE = C + I + G + NX
slide3

We are going to split all expenditures into two parts

    • Autonomous, E = f(Y)
    • Induced
  • Assume very simple economy
    • No trade
    • No government
  • AE = C + I
slide4

Consumption function

  • C = C(Y) = Cauto + MPC x YD
    • Empirics
    • Reasoning
      • Keynesian consumption theory
      • Permanent-income theory
slide5

Average propensity to consume

  • APC = C/YD
  • Marginal propensity to consume
  • MPC = ΔC/ΔYD
    • ΔC = MPC x ΔYD
  • But then, what we do not consume we save
  • Macro definition of savings, S = Y - C
    • Average propensity to save
    • APS = S/YD
    • Marginal propensity to save
    • MPS = ΔS/ΔYD
  • APC + APS = 1
  • MPC + MPS = 1
slide6

Shifts in AE function:

    • Household wealth
    • Interest rates
    • Expectations
    • Other stuff
slide7

Shifts in C function:

    • Household wealth
    • Interest rates
    • Expectations
    • Other stuff
  • They are also shifts in AE function!!!
slide8

Equilibrium:

  • AE = Ya
  • Keynesian Cross
slide9

Investment function

  • I = I(r, exp, …)
slide10

AE = AE(Y) = C + I = (Cauto + I) + MPC x YD

  • Equilibrium: AE = Y
  • Shifts in AE and determination of Ya
  • A multiplier:
    • A (change in equilibrium Y)/(autonomous change in AE)
    • (simple) Multiplier = ΔY/ΔAE = 1/(1 – MPC)
    • Canadian multiplier