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AGGREGATE EXPENDITURES: The total expenditures on gross domestic product undertaken in a given time period by the four sectors -- household, business, government, and foreign. Expenditures made by each of these sectors are specifically labeled consumption expenditures, investment expenditures, government purchases, and net exports. Aggregate expenditures (AE) are a cornerstone in the study of macroeconomics, playing critical roles in Keynesian economics, aggregate market analysis, and to a lesser degree, monetarism.
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Lesson 5: Demand | Unit 4: Determinants
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Page: 18 of 20
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- Why relaxing the ceteris paribus assumption enables further analysis of demand and markets.
- How the changes in the demand determinants cause rightward or leftward shifts in the demand curve.
- The five basic demand determinants: income, preferences, prices of other goods, buyers' expectations, and number of buyers.
- How income affects the demand for normal goods differently than inferior goods.
- How a change in the price of a substitute goods affects demand differently than a change in the price of a complement good.
- Most important of all, the difference between a change in demand, caused by a change in a demand determinant, and a change in quantity demanded, caused by a change in price.
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AUTONOMOUS CONSUMPTION Household consumption expenditures that do not depend on income or production (especially disposable income, national income, or even gross domestic product). That is, changes in income do not generate changes in consumption. Autonomous consumption is best thought of as a baseline or minimum level of consumption that the household sector undertakes in the unlikely event that income falls to zero. It is measured by the intercept term of the consumption function or the consumption line. The alternative to autonomous consumption is induced consumption, which does depend on income.
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PURPLE SMARPHIN
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Today, you are likely to spend a great deal of time flipping through the yellow pages trying to buy either a velvet painting of Elvis Presley or a wall poster commemorating yesterday. Be on the lookout for vindictive digital clocks with revenge on their minds.
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Post WWI induced hyperinflation in German in the early 1900s raised prices by 726 million times from 1918 to 1923.
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"The past is a foreign country; they do things differently there." -- Leslie Poles Hartley, Writer
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