Please enable JavaScript.
Coggle requires JavaScript to display documents.
Unit 5 : The Aggregate Expenditure Model (Closed Model); Chapter 31, p617 …
Unit 5 : The Aggregate Expenditure Model (Closed Model); Chapter 31, p617 - 620
-
-
-
-
Equilibrium GDP
Level of output where production creates level of spending sufficient to purchase at specific level of output.
-
-
-
-
At levels of GDP > Eq GDP = Aggregate expenditure < GDP: Inventories accumulate, spending decreases - Business decreases output until Eq GDP reached.
At levels of GDP < Eq GDP = Aggregate expenditure > GDP: Inventories purchased too quickly for production to keep up, spending spending increases- Business increases output until Eq GDP reached.
Other features of Eq GDP
a) Savings = Planned investment ; savings are leakages in spending thus consumption decreases. Investment = Injection of spending (replacement for savings)
-