Please enable JavaScript.

Coggle requires JavaScript to display documents.

INTRO TO MACROECONOMICS - Coggle Diagram

- - - - Firms
        
        Consumer Expenditure (Cd) (1)
        
        Injections (3)
        
        Investment (Id)
        
        Exports (Xd)
        
        Gov Expenditure (Gd)
      - Households
        
        Withdrawals (4)
        
        Savings (S)
        
        Taxes (T)
        
        Imports (M)
  - - - i.e. value of products = wages, rent, profits, etc
      - Income used for
        
        Withdrawal
        
        re-enters as injections (eventually)
        
        Spent
        
        Expenditure
- - - - M = Cm + Im + ....
      - X- M = net exports
- - - - National Income (NY) increase -> PP increase -> increased spending (on all goods) -> increase in C
        
        How much increase in C to increase in NY
        
        Marginal Propensity to Consume (MPC)
      - a flow variable (measured over period of time
    - - stock
        
        money (in bank deposits), fixed assets (properties, art pieces), financial assets (bonds, foreign currencies)
        
        measured at particular point in time
      - Poor performance in financial assets -> feel "poorer" -> perceive a decrease in wealth -> choose to consume less + save more -> restore wealth
        
        or conversely, does not feel the need to save to add to their now-larger wealth
      - Wealth =/ Income
    - - Disposable Income (Yd)
        
        Y - Taxes + Transfers
        
        Available for consumers to be allocated to:
        
        Savings
        
        Consumer Expenditure (C)
      - Change in Tax/Subsidy -> Change in Yd -> Change in PP -> Change in consumption
    - - Expect increase in future prices -> Expect decrease in future PP -> Increase C now to maximise utility -> increased willingness to consume
      - Expect decrease in future income -> Increase in saving -> Decrease C now to save more of income
    - - cost is measured by interest rate
        
        borrowers: explicit cost of borrowing
        
        increase in interest rate -> when choosing to consume -> higher opportunity cost -> interest income foregone -> disincentivise consumption
        
        savers: earnings from bank savings
        
        increase in interest rate -> increased cost of borrowing -> disincentivise borrowing to finance spending