Thursday, November 4, 2010

Keynesian cross. Makes me tear up.

1. The goals of Keynesian economics is to bring the economy back into long run equilibrium with potential output.

2. A desired total spending (or aggregate expenditure, or "aggregate demand") curve is drawn as a rising line since consumers will have a larger demand with a rise in disposable income, which increases with total national output. This increase... is due to the positive relationship between consumption and consumers' disposable income in the consumption function. Aggregate demand may also rise due to increases in investment (due to the accelerator effect), while this rise is reduced if imports and tax revenues rise with income. Equilibrium in this diagram occurs where total demand, AD, equals the total amount of national output, Y, (which corresponds to total national income or production). Total demand equals total supply.

No comments:

Post a Comment