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The amount that firms plan or intend to invest

Planned investment

Aggregate expenditures (closed economy)=


a withdrawal of potential spending from the income-expenditure stream via savings, tax payments, or imports or a withdrawal that reduces the lending of potential of the banking system


an addition of spending to the income-expenditure stream: Investment, government purchases, and net exports


Changes in inventories that firms did not anticipate

Unplanned changes in inventories

Open economy aggregate expenditures


Aggregate expenditures with government purchases

C+ Ig+(x-m)+G

a tax of a constant amount of tax revenue at each level of GDP

lump-sum tax

Equilibrium for open economy


the amount by which aggregate expenditures at the full-employment GDP fall short of those required to achieve the full-employment GDP

recessionary expenditure gap

the amount by which an economy's aggregate expenditures at the full-employment GDP exceed those just necessary to achieve the full-employment level of GDP.

inflationary expenditure gap

Disposable income increases consumption,

and saving both increase

Greater MPD=

smaller increase in income which results in increase in consumption

consumers decide to increase household debt, this action will

shift consumption schedule upward

when aggregate expenditure is greater than GDP,

then there will be an unplanned decrease in inventories and GDP will increase

injections into the income- expenditure stream includes

investment and exports

open mixed economy- the level of GDP will contract when

Sa+M+T exceeds Ig+X+G

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