CHECKPOINT 1

Attaining Zen (Now On A Bigger Scale)

The main goal of inputting changes in AD and AS is to deduce or estimate changes in the General Price Level or Equilibirum Level of Output. This is how.

QUESTION 1

Attaining Zen (Now On A Bigger Scale)

How is equilibrium national income determined?

An automatic adjustment process determines the equilibrium national income of an economy.

CHECKPOINT 2

Keynesian Model Of Income Determination

Classical theory looks at AD and AS similar to the diagrams we use for microeconomics, but Keynes identified an alternative way of determining income levels in the nation based on Aggregate Expenditure and expectations - two things unique to the marcoeconomic perspective

QUESTION 2

Keynesian Model Of Income Determination

What is AE and how is it different from AD/AS?

The Keynesian model looks and aggregate expenditure rather than demand, and is thus an upward sloping curve. There is also no equivalent of the AS curve in this model.

CHECKPOINT 3

Meeting The Budget

Why is there a difference between planned and actual?

QUESTION 3

Meeting The Budget

Why is there a difference between planned and actual?

Not all the money one plans to spend will actually be spent. Similarly, not all the money an economy anticipates will be spent is actually spent.

CHECKPOINT 4

The AE-Income Approach Of Income Determination

How the AE model works

QUESTION 4

The AE-Income Approach Of Income Determination

How do we use the AE model to determine equilibrium national income?

By plotting a line that represents actual expenditure, we can find the equilibrium level of national income, which is the intersection point of the two lines.

Medal
anddd you're done! Here's what we did in this lesson:
  • Explain how equilibrium national output is determined, and the adjustment process Review
  • State the assumptions of the AE model and axis of the graph Review
  • Differentiate between planned and actual AE Review
  • Explain how AE model can be used to determine equilibrium output Review
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