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Matakuliah
Tahun
: J0594-Teori Ekonomi
: 2009
THE AGGREGATE EXPENDITURES
Pertemuan 7
Consumption and Investment
Simplifications
Private Closed Economy
Planned Investment
Investment Schedule
Investment
Demand
Curve
8
20
ID
Investment Schedule
Investment (billions of dollars)
r and i (percent)
Investment Demand Curve
Investment
Schedule
20
Ig
20
Bina Nusantara University
Investment (billions of dollars)
Real GDP (billions of dollars)
3
Consumption and Investment
• Real Domestic Output
• Aggregate Expenditures
– Aggregate Expenditures Schedule
• Equilibrium GDP
• Disequilibrium
• Equilibrium GDP:
C + Ig = GDP
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4
Consumption
and
Investment
(2)
Real
Domestic (3)
(7)
(8)
Output ConUnplanned Tendency of
(5)
(6)
(and sumpInvestment Aggregate Changes in Employment
(1)
(4)
(Ig)
Expenditures Inventories Output and
Employ- Income) tion Saving (S)
(+ or -)
Income
(C+Ig)
ment (GDP=DI) (C)
(1-2)
…in Billions of Dollars
(1) 40
$370
$375
$-5
20
$395
$-25
Increase
(2) 45
390
390
0
20
410
-20
Increase
(3) 50
410
405
5
20
425
-15
Increase
(4) 55
430
420
10
20
440
-10
Increase
(5) 60
450
435
15
20
455
-5
Increase
(6) 65
470
450
20
20
470
0
Equilibrium
(7) 70
490
465
25
20
485
+5
Decrease
(8) 75
510
480
30
20
500
+10
Decrease
(9) 80
530
495
35
20
515
+15
Decrease
(10) 85
550
510
40
20
530
+20
Decrease
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Graphically…
5
Consumption and Investment
530
(C + Ig = GDP)
Consumption (billions of dollars)
510
490
470
450
Equilibrium
Point
Aggregate
Expenditures
C + Ig
C
Ig = $20 Billion
430
410
390
C = $450 Billion
370
45°
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370 390 410 430 450 470 490 510 530 550
Disposable Income (billions of dollars)
6
Other Features of Equilibrium GDP
– Saving Equals Planned Investment
• Leakage
• Injection
– No Unplanned Changes in Inventories
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7
Aggregate Expenditures (billions of dollars)
Changes in Equilibrium GDP and the multiplier
(C + Ig)1
(C + Ig)0
(C + Ig)2
510
490
Increase in
Investment
Decrease in
Investment
470
450
430
Bina Nusantara University
45°
430
450
470
490
510
Real GDP (billions of dollars)
8
Adding International Trade
• Net Exports and Aggregate Expenditures
• Net Exports Schedule
• Net Exports and Equilibrium GDP
– Positive Net Exports
– Negative Net Exports
• International Economic Linkages
– Prosperity Abroad
– Tariffs
– Exchange Rates
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9
International Trade
Net Exports and
Equilibrium GDP
C + Ig+Xn1
C + Ig
C + Ig+Xn2
Aggregate Expenditures
(billions of dollars)
510
490
Aggregate
Expenditures
with Positive
Net Exports
Aggregate
Expenditures
with Negative
Net Exports
470
450
430
45°
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Net Exports Xn
(billions of
Dollars)
430
450
470
490
510
Real GDP (billions of dollars)
+5
0
-5
Positive Net Exports
450
470
Negative Net Exports
490
Xn1
Xn2
Real
GDP
10
Adding The Public Sector
Government Purchases and GDP
(1)
Level of
Output
and
Income
(GDP=DI)
(5)
(2)
(7)
Net Exports
Consu
(Xn)
Aggregate
(4)
(6)
mp(3)
Investment Exports Imports Government Expenditures
tion
(C+Ig+Xn+G)
Saving (S)
(Ig)
(G)
(X)
(M)
(C)
(2)+(4)+(5)+(6)
…in Billions of Dollars
(1) $370
$375
$-5
$20
10
10
20
$415
(2)
390
390
0
20
10
10
20
430
(3)
410
405
5
20
10
10
20
445
(4)
430
420
10
20
10
10
20
460
(5)
450
435
15
20
10
10
20
475
(6)
470
450
20
20
10
10
20
490
(7)
490
465
25
20
10
10
20
505
(8)
510
480
30
20
10
10
20
520
(9)
530
495
35
20
10
10
20
535
(10) 550
510
40
20
10
10
20
550
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11
Adding The Public Sector
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C + Ig + Xn + G
Aggregate Expenditures (billions of dollars)
Government
Spending and
GDP
C + Ig + Xn
C
Government
Spending of
$20 Billion
$20 Billion Increase
in Government
Spending Yields an
$80 Billion Increase
In GDP
45°
470
550
Real GDP (billions of dollars)
12