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The aggregate expenditures model - Coggle Diagram
The aggregate expenditures model
By John Maynard Keynes
stuck price model assumption
GDP=DI=MPC
Closed economy
Equilibrium GDP
S=Ig
Saving =Leakage
Investment=Injection
No unplanned changes in inventory
Actual change =+change plus investment sum
Firms don't change production
C+Ig=GDP
Multiplier
Change in real GDP divided by initial change in spending
1 divided my MPS
GDP>Equilibrium prices =below 45 degree line= decrease output production=decrease employment
Firms produce as long as they receive equal or exceeding output for production
Firms decide output on changes in inventory
GDP<Equilibrium prices =above 45 degree line =increase output production =increase employment