Beruflich Dokumente
Kultur Dokumente
Chapter 21
Learning Objectives
C = a + bYD
where a represents autonomous consumption expenditure
and bYD represents induced consumption expenditure.
C 45º line
YD
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Yd a + bYd = C
$ 0 $4000 $ 0 $ 4000
$ 5000 $4000 $ 2500 $ 6500
$ 8000 $4000 $ 4000 $ 8000
$10000 $4000 $ 5000 $ 9000
$15000 $4000 $ 7500 $11500
$20000 $4000 $10000 $14000
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$8000
$6000
$4000
APC = C/YD
Yd C APC MPC
C / Yd ∆ YD ∆ C ∆C/∆YD
$ 0 $ 4000 …
$5000 $2500 0.5
$ 5000 $ 6500 1.30
$3000 $1500 0.5
$ 8000 $ 8000 1.00
$2000 $1000 0.5
$10000 $ 9000 0.90
$5000 $2500 0.5
$15000 $11500 0.77
$5000 $2500 0.5
$20000 $14000 0.70
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Yd C Savings = Yd - C
$ 0 $ 4000 -$4000
$ 5000 $ 6500 -$1500
$ 8000 $ 8000 $ 0
$10000 $ 9000 $1000
$15000 $11500 $3500
$20000 $14000 $6000
45º line
600
Desired Xonsumption
450 C
300
150 •
Desired Consumption
Functions C1 C0
450 •
Suppose there is an
unexpected 300
increase in wealth.
150 •
The consumption
function will shift 30
upward, and the saving 150 300 450 600
function downward. Real Disposable Income
Desired Saving
Other reasons the 150
S0
consumption function S1
might shift include 0
-30 150 450 600
changes in interest 300
-150 Real Disposable Income
rates or expectations.
Copyright © 2005 Pearson Education Canada Inc.
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Changes in Sales
The higher the level of production and sales, the larger the
desired stock of inventories. This means that changes in the
rates of production and sales cause temporary bouts of
investment (or disinvestment) in inventories.
Business Confidence
Investment Function
200 I’
I
150
interest rate rises
expectations worsen
100 I’’ sales decrease
0 Y
Actual National Income
22 of 30
AE = C + I
Suppose C = 30 + (0.8)Y
I = 75
AE = C + I = 30 + (0.8)Y + 75
Y C I AE
900 AE
30 54 75 129
Desired Aggregate
120 126 75 201 600
Expenditure
150 150 75 225
300
300 270 75 345
450 390 75 465
105
525 450 75 525
600 510 75 585
900 750 75 825 300 600 900
Actual National Income
Summary
Desired
National Aggregate Effect
Income (Y) Expenditure
OUTPUT (AE = C + I)
30 129 Pressure
120 201 On output
150 225 to rise
300 345 ↓
450 465 ↓
525 525 Equilibrium income
600 585 ↑
900 825 Pressure on output
to fall
S-I=W
Y-C-I=W
Y - (C + I) = W
⇒ Y - AE = W
Desired Aggregate
Equilibrium national
600
Expenditure
income is that level of •
national income where
desired aggregate 300
expenditure equals 105
actual national income.
300 600 900
Actual National Income
Or, equivalently, it is the Saving, Investment
level of national income S
• I
where desired saving 75
equals desired investment. 0
-30 300 600 900
Actual National Income
∆Y
Y0 Y1 Y Y0 Y1 Y
AE =Y AE =Y
AE AE AE1
AE1
E1
e1 • AE0
E1 AE0
e2 •
e´1
e0 •E e0
0 •E0
Y0 Y1 Y Y0 Y1 Y
The Multiplier
Suppose there is an
increase in autonomous AE AE =Y
desired expenditure equal
to ∆A. E1
e1 • AE1
We can derive the precise e´1 •
value of the simple multiplier: AE0
∆A
Simple multiplier = e0 •E
0
∆Y
∆Y 1
= Y0 Y1 Y
∆A 1-z
AE AE =Y
AE
AE =Y E1 AE1
•
E1 AE1 AE0
•
∆A
AE0
•E ∆A •E
0
0
∆Y ∆Y
Y0 Y1 Y0 Y1
Y Y