Chapter 8 - Building the aggregate expenditure model. In this chapter you will learn: The factors that determine consumption expenditure and saving, the factors that determine investment spending, how equilibrium GDP is determined in a closed economy without a government sector, about the effects of the multiplier on changes in equilibrium GDP, | Building the Aggregate Expenditure Model Chapter 8 SLIDES PREPARED BY JUDITH SKUCE, GEORGIAN COLLEGE In this chapter you will learn The factors that determine consumption expenditure and saving The factors that determine investment spending How equilibrium GDP is determined in a closed economy without a government sector About the effects of the multiplier on changes in equilibrium GDP In this chapter you will learn How international trade affects equilibrium output How adding the public sector affects equilibrium output The distinction between equilibrium and full-employment GDP The limitations of the aggregate expenditure model Chapter 8 Topics Simplifications Tools of the Aggregate Expenditures Model Consumption & Saving Investment Equilibrium GDP Other Features of Equilibrium GDP Changes in Equilibrium GDP & the Multiplier International Trade & Equilibrium Output Adding the Public Sector Equilibrium vs Full-Employment GDP Simplifications A private closed economy No government No . | Building the Aggregate Expenditure Model Chapter 8 SLIDES PREPARED BY JUDITH SKUCE, GEORGIAN COLLEGE In this chapter you will learn The factors that determine consumption expenditure and saving The factors that determine investment spending How equilibrium GDP is determined in a closed economy without a government sector About the effects of the multiplier on changes in equilibrium GDP In this chapter you will learn How international trade affects equilibrium output How adding the public sector affects equilibrium output The distinction between equilibrium and full-employment GDP The limitations of the aggregate expenditure model Chapter 8 Topics Simplifications Tools of the Aggregate Expenditures Model Consumption & Saving Investment Equilibrium GDP Other Features of Equilibrium GDP Changes in Equilibrium GDP & the Multiplier International Trade & Equilibrium Output Adding the Public Sector Equilibrium vs Full-Employment GDP Simplifications A private closed economy No government No taxes No exports or imports All saving is personal Depreciation is zero GDP=NDI=PI=DI Chapter 8 Topics Simplifications Tools of the Aggregate Expenditures Model Consumption & Saving Investment Equilibrium GDP Other Features of Equilibrium GDP Changes in Equilibrium GDP & the Multiplier International Trade & Equilibrium Output Adding the Public Sector Equilibrium vs Full-Employment GDP Tools of the AE Model the amount of goods & services produced & therefore the level of employment depend directly on the level of aggregate expenditures (total spending) assume excess production capacity & unemployed labour price level is constant Chapter 8 Topics Simplifications Tools of the Aggregate Expenditures Model Consumption & Saving Investment Equilibrium GDP Other Features of Equilibrium GDP Changes in Equilibrium GDP & the Multiplier International Trade & Equilibrium Output Adding the Public Sector Equilibrium vs Full-Employment GDP Consumption & Saving The Consumption Schedule higher income .
