Chp11 The Income Expenditure Model

Planned expenditures

is another term for total demand for goods and services

Equilibrium output

the level of GDP at which planned expenditure equals the amount that is produced.

Two factors that can cause autonomous consumption to change

1 Increases in consumer wealth

2 Increase in consumer confidence 

savings function 

the relationship between the level of saving and the level of income 

Multiplier

= 1/1-mpc also for government spending

Tax multiplier

-MCP / 1-mpc

Marginal propensity to import 

The fraction of additional  income  that is spent on imports 

equilibrium output formula

y =C+I = Planned expenditures

The multiplier for investment

y = C+I/1-b

marginal propensity to save formula if given mpc

1-mpc

when given the multiplier for taxes use this formula

change in demand = tax multiplier x changes in taxes