AP Econ - Chapter 10.txt

The amounts bussiness firms collectively intend to invest

Shows the amount of investment forthcoming at each level of GDP

• Aggregate expenditures consist of consumption plus investment.
• This schedule shows the amount (C + I_g) that will be spent at each possible output or income level

The equilibrium output is that output whose production creates total spending just sufficient to purchase that output. So the equilibrium llevel of GDP is the leel at which the total quantity of goods produced (GDP) equals the total quantity of goods purchased (c + I_g)

Saving is a leakage or withdrawal of spending from the income-expenditures stream. Saving is what causes consumption to be less than total output or GDP

• Investment - the purchases of capital goods - is an injection of spending into the income-expenditures stream.
• Injection is a potential replacement for the leakage of saing.

There are no Unplanned changes in inventories at equilibrium GDP. Equilibrium only occurs when planned investment and savings are equal. But when unplanned changes in inventory are considered, investment and saving are always equal, regardless of the level of GDP. This is true because actual investment consists of planned investment and unplanned investment (unplanned changes in inventories). Unplanned changes in inventories act as a balancing item that equates the actual amounts saved and invested in any period.

• Exports minus imports
• X_n = X - M

a tax of a constant amount or, more precisely, a tax yielding the same amount of tax revenue at each level of GDP

A recessionary expenditure gap is the amount by which aggregate expenditures at the full enployment GDP fall short of those required to achieve the full-employment GDP

An Inflationary expenditure gap is the amount by which an economy's aggregate expenditures at the full employment GDP exceed those just necessary to achieve the full employment GDP.