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Macro Chapter 11

STUDY
PLAY
The amount that firms plan or intend to invest
Planned investment
C+Ig=
GDP
Aggregate expenditures (closed economy)=
C+Ig
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
Leakage
an addition of spending to the income-expenditure stream: Investment, government purchases, and net exports
Injection
Changes in inventories that firms did not anticipate
Unplanned changes in inventories
Open economy aggregate expenditures
C+Ig+(x-m)
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
Sa+M+T=Ig+X+G
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