# Macroeconomics

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Macroeconomics

## 1. Aggregate Demand and Supply

### 1.1. Aggregate Demand

1.1.1. Positive Influence

1.1.1.1. People's Income ( I )

1.1.1.2. Gov. Expenditure ( G )

1.1.1.3. Amount of Exports ( X )

1.1.2. Negative

1.1.2.1. Price of Goods ( CPI )

1.1.2.2. Taxes ( T )

1.1.2.3. Borrowing Costs ( Interest Rate i )

1.1.3. Change in Price: Movement along the AD Curve

1.1.4. Change in nonprice: Shift

1.1.4.1. to Left: Decrease in demand

1.1.4.2. to Right: Increase in demand

### 1.3. Aggregated Supply

1.3.1. Positive

1.3.1.1. Price

1.3.1.2. Technology

1.3.2. Negative

1.3.2.1. Input Price

1.3.2.2. Price of Foreign Exchange

1.3.2.3. Taxes ( T )

1.3.3. Change in Product Price: Along

1.3.4. Change in nonprice: Shift

1.3.4.1. to Left: Decrease

1.3.4.2. to Right: Increase

### 1.4. Self-Correction Mechanism

1.4.1. potential GDP is a straight line

## 2. GDP: Income/Production

### 2.1. Equilibrium: Supply = Demand

2.1.1. Supply = GDP

2.1.2. Demand = Total Spending

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

2.1.4. 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

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

### 2.2. MPC: Marginal Propensity to Consume

2.2.1. MPC is the slope of consumption function

2.2.2. Consumption function is the relationship between C and I

2.2.3. MPC = Change in C / Change in GDP

2.2.4. MPC is a fraction ( 0 < MPC < 1 )

### 2.3. Multiplier = Change in GDP / Change I

2.3.1. .

2.3.2. the ratio of

2.3.2.1. change in overall demand

2.3.2.2. change in one component of demand

2.3.2.3. so does it also = change GDP / Change C ?

2.3.3. .

2.3.4. MPC + MPS = 1, and

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