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Macroeconomics by Mind Map: Macroeconomics
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GDP: Income/Production

Equilibrium: Supply = Demand

Supply = GDP

Demand = Total Spending

Demand = Consumption + Investment + Gov. Expenditure + Exports - Imports Demand = C + I + G + X - IM

Taxes and imports rise when people's income is higher, thus spending line is flatter, and the multiplier effect is smaller it takes a larger increase in G or a larger tax cut to significantly raise GDP

Equilibrium is defined by a 45 line in spending-income axises

MPC: Marginal Propensity to Consume

MPC is the slope of consumption function

Consumption function is the relationship between C and I

MPC = Change in C / Change in GDP

MPC is a fraction ( 0 < MPC < 1 )

Multiplier = Change in GDP / Change I


the ratio of, change in overall demand, change in one component of demand, so does it also = change GDP / Change C ?


MPC + MPS = 1, and

Multiplier = 1/(1-MPC) = 1/MPS

Fiscal Policy Expenditure, taxes

Aggregate Demand and Supply

Aggregate Demand

Positive Influence, People's Income ( I ), Gov. Expenditure ( G ), Amount of Exports ( X )

Negative, Price of Goods ( CPI ), Taxes ( T ), Borrowing Costs ( Interest Rate i )

Change in Price: Movement along the AD Curve

Change in nonprice: Shift, to Left: Decrease in demand, to Right: Increase in demand

Axis: Price and Real GDP

Aggregated Supply

Positive, Price, Technology

Negative, Input Price, Price of Foreign Exchange, Taxes ( T )

Change in Product Price: Along

Change in nonprice: Shift, to Left: Decrease, to Right: Increase

Self-Correction Mechanism

potential GDP is a straight line