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Fifth Edition
Economics
A Contemporary Introduction
William A. McEachern
Aggregate Expenditure
1
Exhibit 1: Consumer Spending and
Disposable Income in the United States
Source: Economic Report of the President, February 1999.
Aggregate Expenditure
2
Exhibit 2: Dependence of Consumer
Spending on Disposable Income
Aggregate Expenditure
3
Real consumption (trillions of dollars)
Exhibit 3: The Consumption Function
7.0
6.0
C
5.0
4.0
3.0
2.0
1.0
0
1.0
Aggregate Expenditure
2.0
3.0
4.0 5.0 6.0 7.0 8.0
Real disposable income
(trillions of dollars)
4
Consumption
(trillions of dollars)
Exhibit 5a: Marginal Propensities to
Consume and to Save
b
C = 0.4
a
DI = 0.5
MPC =
0
Aggregate Expenditure
4
0.4
C
=
=
5
0.5
DI
Real disposable income
(trillions of dollars)
5
Saving
(trillions of dollars)
Exhibit 5b: Marginal Propensities to
Consume and to Save
S
0.1
1
MPS = DI =
=
0.5
5
c
0
Aggregate Expenditure
d
S = 0.1
DI = 0.5
Real disposable income
(trillions of dollars)
6
Exhibit 6: Shifts in the Consumption
Function
C"
Real consumption
C
0
Aggregate Expenditure
C'
Real disposable income
7
Exhibit 7: Rate of Return on Golf Carts
and the Opportunity Cost of Funds
Interest rate (percent)
25
20
Expected rate
of return
15
10
8
Market rate
of interest
5
0
$2,000 $4,000 $6,000 $8,000 $10,000
Aggregate Expenditure
Investment
8
Nominal interest rate (percent)
Exhibit 8: Investment Demand Curve
for the Economy
10
8
6
D
0
Aggregate Expenditure
0.5 0.6 0.7
Investment spending
(trillions of dollars)
9
Real planned investment
(trillions of dollars)
Exhibit 9: Autonomous Investment Function
0.7
I"
0.6
I
0.5
I'
0
Aggregate Expenditure
1.0
2.0
3.0
4.0
5.0
6.0 7.0
Real disposable income
(trillions of dollars)
10
Exhibit 10: Annual Percentage Changes
in U.S. Real GDP, Real Consumption,
and Real Investment
Aggregate Expenditure
Source: Based on annual estimated found in Survey of Current Business, U.S. Department of Commerce, 77 (August 1997)
and 79 (January 1999).
11
Net exports (billions of dollars)
Exhibit 11: Autonomous Net
Export Function
0
1.0
–80
2.0
3.0
4.0
5.0
6.0
Real disposable income
(trillions of dollars)
X"– M"
–100
X–M
–120
X' – M'
Aggregate Expenditure
12
Exhibit 12: U.S. Spending Components
as a Percentage of GDP
Source: Based on estimates from U.S. Dept. of Commerce, Survey of Current Business, 77 (Aug. 1997) and 79 (Jan. 1999);
and Economic Report of the President, February 1999.
Aggregate Expenditure
13
Real exports
(trillions of dollars)
X
0.6
0
2.0 4.0 6.0 8.0
Real DI (trillions of dollars)
Real imports
(trillions of dollars)
Exhibit 13:
Imports,
Exports, and
Net Exports
M
0.6
0
2.0 4.0 6.0 8.0
Real DI (trillions of dollars)
0.6
X–M
0
2.0 4.0 6.0 8.0
–0.6
Aggregate Expenditure
Real DI
(trillions of dollars)
14
Real net exports (trillions of dollars)
Exhibit 14: Shifts in Net Exports
0.6
0
4.0
–0.6
Aggregate Expenditure
6.0
X' – M'
8.0
10.0 Real disposable income
(trillions of dollars)
X" – M"
X–M
15