congratulations on successful completion of 1 st semester!! reminder: you are close but not there...
TRANSCRIPT
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Congratulations on Successful Congratulations on Successful Completion of 1Completion of 1stst Semester!! Semester!!
Reminder: you are close but not there yet Reminder: you are close but not there yet Reminder: Economics is really fun and interestingReminder: Economics is really fun and interesting Senior Reminder: Academic expectationsSenior Reminder: Academic expectations Senior Reminder: You will likely need this for college and lifeSenior Reminder: You will likely need this for college and life
Juniors Reminder:Juniors Reminder:
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Natl. Score DistributionsNatl. Score Distributions
Score PercentScore Percent 5 14.9%5 14.9% 4 22.7%4 22.7% 3 15.2%3 15.2% 2 19.8%2 19.8% 1 27.5%1 27.5%
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Aggregate Demand and Aggregate Demand and Aggregate Supply: Aggregate Supply:
Fluctuations in Outputs and Fluctuations in Outputs and PricesPrices
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Keynesian= Simple Model of Keynesian= Simple Model of the Economythe Economy
Purpose of 3.1 is to develop a simple Purpose of 3.1 is to develop a simple model of the economymodel of the economy
GDP= C+I+G+NXGDP= C+I+G+NX Variable?Variable? Keynesian Model= Price level held Keynesian Model= Price level held
constantconstant
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Simple Keynesian ModelSimple Keynesian Model
Planned aggregate expenditure = C + I + G + NX 45 degree line: all points where production (real
GDP) = aggregate expenditure Equilibrium occurs where planned aggregate
expenditure equals production
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Equilibrium and Disequilibrium in Equilibrium and Disequilibrium in thethe
Keynesian ModelKeynesian Model
C(consumption) = a+b(marginal propensity to consume)*Y(income or C(consumption) = a+b(marginal propensity to consume)*Y(income or output)output)
MPC= change in consumption/change in incomeMPC= change in consumption/change in income
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What can households do with What can households do with income?income?
MPC (marginal propensity to MPC (marginal propensity to consume) + MPS (marginal consume) + MPS (marginal propensity to save) = 1propensity to save) = 1
APC (average propensity to APC (average propensity to consume)consume)
APS (average propensity to save)APS (average propensity to save)
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Saving and DissavingSaving and Dissaving
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Increase in InvestmentIncrease in Investment
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Investment DemandInvestment Demand
Interest rate decreases from r to r1. Investment increases from I to I1.
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Different Elasticities of Investment Different Elasticities of Investment DemandDemand
Decrease of interest rates from r to r1. * With IA, investment increases from I to I2.
With IB, investment increases from I to I1. * IA is more elastic than IB.