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11 Cards in this Set
- Front
- Back
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Consumption (C)
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Goods and services purchased by consumers
The largest component of GDP C = c0 + c1(Y - T) |
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Investment (I)
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Purchase of new capital goods
Non-residential and residential Also called 'fixed investment' Taken to be exogenous |
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Government Spending (G)
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Purchases of goods and services by government at all levels
NOT government transfers (unemployment benefits and pensions or payment of gov. debt) Taken to be exogenous |
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Trade Balance/Net Exports (X-IM)
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If positive, trade surplus
If negative, trade deficit |
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Inventory Investment
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Not all goods produced are sold that year (stored for later years)
Inventory Investment = Production - Sales |
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Total Demand for Goods (Z)
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Identical to: C + I + G + X - IM
Z = c0 + c1(Y - T) + I + G |
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The Multiplier
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1/(1-c1)
Multiplied with the autonomous spending: (c0 + I + G - (c1)T) |
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Equilibrium in the Goods Market/Keynes Cross
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Saving
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The sum of private and public saving
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Private Saving
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Disposable income minus consumption
S = Yd - C S = Y - T - C |
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Public Saving
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Taxes minus government expenditure
T - G |
