McConnell, Brue, Flynn: Economics, 20th Edition Chapter 29 – Flashcards
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investment demand
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investment spending determined by the real interest rate
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investment schedule
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shows the amount of investment (Ig) forthcoming at each GDP level
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aggregate expenditures
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for the private economy, shows the amount that will be spent at each possible output or income level (C+Ig)
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DI =
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real GDP
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equilibrium GDP
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G + Ig = GDP
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features of equilibrium GDP
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savings and planned investment equal, no unplanned changes in inventory, leakages = injections, S = I
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change in GDP from rise in investment spending
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∆GDP = ∆I / MPS (∆I * m)
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when incorporating international trade
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a net export schedule will show the net exports that will occur at each level of GDP, where positive net exports increase aggregate expenditures and GDP but negative net exports decrease them
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when adding the public sector
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government expenditure (G) simply rises
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recessionary expenditure gap
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the amount by which aggregate expenditures at full employment GDP fall short of those required to achieve full employment GDP
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inflationary expenditure gap
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the amount by which aggregate expenditures at full employment exceed those just necessary to achieve full employment GDP
