EC202 1nd Edition Lecture 26 Outline of Last Lecture I. Modeling fluctuationsII. Planned aggregate expenditureIII. Unplanned investmentIV. Consumption Outline of Current Lecture II. Planned expenditures and outputCurrent Lecture-planned expenditures and output-equilibrium-no tendency for change-short-run equilibrium output-the level of output at which all of it is willingly purchased-Y = Planned Expenditures-Y = C + Ip + G + NX = PAE-output equals planned aggregate expenditures-no surplus and no shortage-equilibrium: no surplus and no shortage of goods and services-Y = C + Ip + G + NX-Y – C – G – Ip = NX = X – IM-IM = (Ip + X) – (Y – C – G)-deficiency of national saving to fund planned investment and exports is made up by foreign good purchases These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.-planned expenditures depend on Y-observations-other factors remaining constant, a decline in autonomous spending causes short-run equilibrium output to fall and creates a recessionary gap-a decrease in autonomous spending can be caused by a reduction in C, Ip, G, and/or
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