The Multiplier Model课件.pptVIP

The Multiplier Model Chapter 10 The Multiplier Model The multiplier model tells us how much output may change as the AD shifts due to an initial change in expenditures. The Multiplier Model The multiplier model assumes that the price level remains constant - and then explores specific questions about expenditures. The Multiplier Model The multiplier model gives numerical answers about the effect of changes in aggregate expenditures on aggregate output. The AS/AD Model When Prices Are Fixed, Fig. 10-1, p 236 Aggregate Production Aggregate production (AP) is the total amount of goods and services produced in every industry in an economy. Aggregate Production Production creates an equal amount of income. Aggregate Production Graphically, aggregate production in the multiplier model is represented by a 45° line through the origin. Aggregate Production Real production (in dollars) is on the vertical axis, and real income (in dollars) is on the horizontal axis. The Aggregate Production Curve, Fig. 10-2, p 237 Aggregate Expenditures Aggregate expenditures (AE) in the multiplier model consist of: Consumption – spending by consumers. Investment – spending by business. Spending by government. Net foreign spending on Canadian goods – the difference between Canadian exports and Canadian imports. Aggregate Expenditures The four expenditure components of national income accounting were developed around the multiplier model. Autonomous and Induced Expenditures As income changes, expenditures change, but not as much as income. Autonomous and Induced Expenditures Even if income is zero, spending is still taking place. The money comes from borrowing, or from previous savings. Autonomous and Induced Expenditures Autonomous expenditures are those that would exist at a zero level of income. Autonomous expenditures are independent of income. Autonomous and Induced Expenditures Autonomous expenditures change because something other than income changes. Autonomous and Induced Expenditures