Lecture notes Macroeconomics CHAPTER 12 Aggregate Demand: Applying the IS-LM Model ISBN: 9781319263904
2 views 0 purchase
Course
Economics
Institution
University Of Reading (UoR)
Book
Macroeconomics
-Individual Lecture notes for each of the specified Economics book chapters.
-Written in flashcard style, some in colour scheme for easier memorisation.
-Everything from each chapter was included, for assurance that all material is covered.
-Graphs also included in the form of screen-grabs fr...
Lecture notes Macroeconomics CHAPTER 5 Inflation: Its Causes, Effects, and Social Costs ISBN: 9781319263904
Lecture notes Macroeconomics CHAPTER 7: Unemployment and the Labor Market ISBN: 9781319263904
Lecture notes Macroeconomics CHAPTER 4 The Monetary System: What It Is and How It Works ISBN: 9781319263904
All for this textbook (8)
Written for
University of Reading (UoR)
Unknown
Economics
All documents for this subject (10)
Seller
Follow
AKrasha
Content preview
MACROECONOMICS CHAPTER 12: Aggregate Demand II: Applying the IS-LM Model
Macroeconomics 11th Edition By N. Gregory Mankiw
The Keynesian Cross– Planned Expenditure Actual expenditure
● The amount households, firms, and the
government spend on goods and services
● It equals the economy’s gross domestic product
(GDP)
Planned expenditure
● The amount households, firms, and the
government would like to spend on goods and
services
Why actual expenditure differs from planned
expenditure
● Firms can have unplanned inventory investment
when their sales do not meet their expectations.
○ If firms sell less than they planned, their
inventories automatically rise
○ If firms sell more than planned, their
inventories fall.
● Unplanned changes in inventory→ counted
as investment spending
○ Actual expenditure can be either above or
below planned expenditure.
The determinants of planned expenditure
● PE = C + I + G
● Full version: PE=C ¿
● Graphically:
● Planned expenditure PE depends on income
because higher income→ higher
consumption, which is part of planned
expenditure. The slope of the planned-
expenditure function is the marginal
propensity to consume MPC.
The Economy in Equilibrium The Economy in Equilibrium
● The economy is in equilibrium when:
○ Actual expenditure = planned expenditure
● This assumption is based on the idea that people
have no reason to alter their behavior when their
plans have been realized.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller AKrasha. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $9.00. You're not tied to anything after your purchase.
