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INDUCED GOVERNMENT PURCHASES: Government purchases that depend on income or production (especially national income or gross national product). An increase in national income triggers an increase in induced government purchases. Induced government purchases is graphically depicted as the slope of the government purchases line and is measured by the marginal propensity for government purchases. The induced relation between income and government purchases, as well as other induced expenditures, form the foundation of the multiplier effect triggered by changes in autonomous expenditures.
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Lesson 13: Aggregate Demand | Unit 1: The Concept
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Page: 1 of 22
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In this lesson we take a look at the demand side of the aggregate market (AD/AS analysis)--aggregate demand. A definition: Aggregate Demand is the aggregate or total expenditure on final goods and services produced in the domestic economy, at a range of price levels, during a given time period (usually a year). Three points: - Expenditures are made by all members of society.
- Expenditures are made during the year.
- Expenditures are on the production that people use to satisfy wants and needs.
Aggregate demand is only one side of the aggregate market--the expenditure side--the other side is aggregate supply--the producing side.- Expenditures come from the household, business, government, and foreign sectors.
- Production comes from resources--labor, capital, land, and entrepreneurship.
- The aggregate market is a model used to analyze the economy's total production and the price level.
- This analysis, also called AD/AS, lets us understand macroeconomic events, like recessions, inflation, and unemployment.
- The aggregate market can be used to evaluate the effects of government policies.
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GAINS FROM TRADE The combination of consumer surplus and producer surplus obtained by buyers and sellers when engaging in a market exchange. Gains from trade arise because buyers are typically willing and able to pay a higher price to purchase a good than what they end up paying and because sellers are typically willing and able to accept a lower price to sell a good than what they end up receiving. Both sides of the market exchange are thus better off, have a net gain in welfare, by making the trade. While all types of market exchanges generate gains from trade, this topic is perhaps most important for an understanding of international trade.
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WHITE GULLIBON
[What's This?]
Today, you are likely to spend a great deal of time watching the shopping channel seeking to buy either a turbo-powered vacuum cleaner or a battery-powered, rechargeable vacuum cleaner. Be on the lookout for high interest rates.
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This isn't me! What am I?
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A lump of pure gold the size of a matchbox can be flattened into a sheet the size of a tennis court!
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"Sometimes when you innovate, you make mistakes. It is best to admit them quickly and get on with improving your other innovations. " -- Steve Jobs, Apple Computer founder
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PDI
Personal Disposable Income
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