The Goods Market University of Washington商品市场华盛顿大学.pptVIP

BlCh3 The Goods Market Some definitions (or identities): Value of final production ? national income Y Total output sold ? total output purchased If aggregate sales is the same as aggregate purchases, we can break down Y into the various kinds of demand for output. i.e. we can focus on the composition of aggregate demand for output Y. Composition of aggregate demand Z Consumption C Investment I Fixed Residential (consumers) Non residential (firms) Inventories Government spending G Net exports NX Exports X Less Imports IM Consumption Goods and services purchased by consumers Some might be some sort of investment like durables Investment (not financial) Firms invest in new plants and equipments Consumers invest in new houses Government spending (on goods and services only) Excludes transfers (e.g. medicare, S.S.) and interest payments on gov’t debt (total would be called government expenditures) Exports are foreign demand for domestic goods and services (demand for Y) so they should be included as demand for domestic output. Imports are domestic demand for foreign goods (goods produced abroad) - they should not be included in Y as they are not demand for domestic output. However as they are already included in consumption and other purchases they must be subtracted. Net Exports = Exports - Imports Inventories corresponds to goods that were produced during a certain year I.e. during a specific accounting period but were not sold during the same accounting period. To get an accurate account of production during the year, we must Subtract inventories at the beginning of the year (they were produced in the previous year) Add inventories at the end of the year (produced this year but not sold) Determination of aggregate demand Z By definition (identity): Z ? C + I + G + X - IM in an open economy Z ? C + I + G in a closed economy Let’s assume Fixed prices (short run Keynesian model) One good (everything is in real term) Closed economy Short ru