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UT - ECON 213 - Class Notes - Week 8

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UT - ECON 213 - Class Notes - Week 8

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School: University of Tennessee - Knoxville
Department: OTHER
Course: Principles of Macroeconomics
Professor: Ken Baker
Term: Fall 2017
Tags: Macroeconomics
Name: Macroeconomics Notes
Description: These notes cover class material!
Uploaded: 03/12/2018
4 Pages 37 Views 29 Unlocks
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Unformatted text preview: amily ourpurode F Gro 2010 Kole of government promoting ccano mic youth: Contri louting to physical caprtal Enforcing contracts ,protecting property nights Unit 2: Chapter 8 : Aggregate Expenditures Macroeconomics before After John M. Keynes The classic economic model : The Great Depression & John M.K. Prior to 1130, mainstream The Great Depression economic thought argued that : ||downturn sexiously challenged this prolonged The Laissez-faire Cicare it Perspective alone) approach was the best *Challenged many of the classical approach for the economy ideals & forever split macroeconomia I. The econany was into liffuent camps A study sosAggugate Expenditura com Equililorum EquiorumE = Y = c + * Sole for occurs when incorno AE c = 1000 + 374 Y first, then consumption, then savings AE Caggregate expenditures) - CA Cincone& production) F CA S DAA equilibrium: Cincome/production supply EAE (C loc demand Multiplex Effect Occurs when an initial amount of spending causes income to Do by = AE wuripler I - MPC The AE m iriplier You can find the MPO di cechy in our HE Formulo AE = CALCO AE . poo + 24 + 10 Slope of the consumption function is vec Wien MPa 0.75 = C1-0.15)=1/25 4 - The potential increase in income from a spending is $ 1co y 4 = 400 loo incease in Saving will also increase by Sluo Cyst Moo) Satyafull Aggregate Expendirures Model Hys, government Government has 2 componeres Gond Gout, spendira E Taxes Cmones dover anere collects) 7 both autonomous from wncorra Cdort depend od income To balance, G T Goua runs a balanced budget collects T in taxes & sponds G. we add , and subtract mm Let G = STOD Let a Soo (wat be included wil te combination function old 1000 3/4 New C- 11000 1 34 CY-T known as Disposable wocowe Our new model Cincome / pyodu chop = C++ (1 = AE in equilibrium) Taxes haue less direct impact on income thain an tquivalent change in gov'spending because some of an tax is paid using Savings, both of which are worth drausis Two Multipliers Q: How does the 100 G spending increase y by 9400 & the 4100 T decrease y by $300 ? A The ore Octually 2 multipliers from our AE model The AE multiplier = CVCI - Mp The tax poultipliers VAE mu vpliec ex suppose MPC = 8 AE =(/1-) - .25 Even s o morease in Or will result in occasing but Tax = -5 -4 Even s 100 mcrease in Twill result in Y decreasing by $400 studySoup

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