Macro5Product Market Analysis How Is Output Determined宏观经济学(南开大学,龚刚).ppt

Lecture 5 Product Market Analysis: How Is Output Determined? Macroeconomics I. Introduction The objective of this chapter is to study how output is determined in Keynesian framework. The analysis of output determination in this chapter is often named as multiplier analysis. The trading process: a trading day in Jevits Center (see textbook). II. The Basic Hypothesis Hypothesis 1: The agent does not have full confidence expectation (indicating ……). Hypothesis 2: There is no restriction in the capacity to supply output as demanded in the economy. Hypothesis 3: The price is given (or has been determined separately). III. Consumption Determination The autonomous demand and non-autonomous demand The non-autonomous demand is the demand that is related to a recent sale from which the expenditure is supposed to be recovered. The autonomous demand is demand that is not related to a recent sale. III. Consumption Determination Consumption can be divided into two parts: The income-related (non-autonomous) consumption Non-income-related consumption (often named autonomous consumption) Remark: Examples? III. Consumption Determination The Consumption Function Accordingly, the consumption function can be written as C = A + cY (1) where A can be regarded as autonomous consumption and cY as the income-related (non-autonomous) consumption. Note that also 1 c 0. III. Consumption Determination Consumption Function (continued): III. Consumption Determination Saving Saving (S) is the income that is not used for consumption. Saving function: S = Y - C = Y - (A + cY) = -A + (1 - c)Y III. Consumption Determination Saving (continued) III. Consumption Determination Some Concepts Average propensity to consume (APC) APC = C/Y Average propensity to save (APS) APS = S/Y Marginal propensity to c