Spending and Output in the Short Run. Chapter 13. Chapter 13 Learning Objectives. You should be able to:. List the components of investment. Distinguish between actual and planned aggregate expenditure. Describe the consumption function, graph the consumption function.
AE = C + I + G + NX
AE = Y
Autonomous: the same regardless of the level of income
Induced: dependent on the level of income
where c is the marginal propensity to consume
For every 2% change in the output gap, unemployment changes 1%.
So with a 4% recessionary gap, expect unemployment to be 2% greater than the natural rate.
Under the control of the Treasury.