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Next Next Preso
By Jahnnes Anger Olson
The Aggregate Demand Curve
Negative slope
(negative
correlation).
The Wealth Effect / Real Balance Effect
Money assets (cash, saving accounts, and
bonds). With a lower price level, more goods
can be acquired.
The Interest Rate Effect
As price increases, demand for [credit] money
increases, which in turn increases the interest
rate, which in turn reduces the quantity of
aggregate expenditures.
{And vise versa for price decreases}
The Net Export Effect
When prices rise inside a country, imports
increase and exports decrease.
{and vise versa with prices lowering}
Models and Classical Economic Thought
Increases in aggregate demand won’t increase
employment, and only increase prices.
Say’s Law - “supply creates its own demand”.
Optimism - “If we sit by and do nothing,
statistically, eventually, everything will be
perfect.”
More Classical Economic Thought
As interest rates go up, so do savings;
inversely for business investment.
A Combatant Has Entered The Ring
Keynesian Economists say “demand creates its
own supply”. Government should be involved
with economy with fiscal and/or monetary
policy. Prices and wages should be sticky in the
short run. Savings and consumption are part of
income.
Aggregate Demand (cont,)
Aggregate demand is the total demand for all
final goods and services produced inside an
economy at a given time at a given price level.
Aggregate Demand (cont,)
Consumption + Investment + Gov. spending + Net
exports = Real GDP.
L’autre influences {de consumption} (shift):
Consumer Confidence (right), Household Income
(right), Household borrowing (right), Marginal
Propensity to Consume (right), Interest Rates (left),
and Marginal Propensity to Save (left).
L’autre Influences Plus
{D’investment}: Profit Expectations (right), New
Technologies Available (right), Investment Tax
Incentives (right), Access to New Foreign
Markets (right), Interest Rates (left).
{De Gov. Spending}: Infrastructure Gov.
Investment (right), Gov. Purchases via the
Political Process (right).
L’autre Influences Plus Plus
{Net Exports}: Domestic Quality of Products
(right), Foreign Household Income (right),
Market for Domestic Suppliers (right), Domestic
Price Level (left), Value of Domestic Currency
(left).
Cycles
(calling some of these things “cycles” seems
like a large leap to me)
Business Cycle key points: Expansion, Peak,
Recession/Contraction, Trough.
Economics 101 Notes (3)
Stuff and Things
Net National Income is another term for factor
payments, which are payments used for land,
labor, and capital used in the production of
goods and services (GDP).
Misc. payments includes net interest, rents, and
royalties paid to government.
Economics 101 Notes (3)
“Understand these concepts, combat
these concepts, and relearn these
concepts.”
--Brunette and Ruff--

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Economics 101 Notes (3)

  • 1. Next Next Preso By Jahnnes Anger Olson
  • 2. The Aggregate Demand Curve Negative slope (negative correlation).
  • 3. The Wealth Effect / Real Balance Effect Money assets (cash, saving accounts, and bonds). With a lower price level, more goods can be acquired.
  • 4. The Interest Rate Effect As price increases, demand for [credit] money increases, which in turn increases the interest rate, which in turn reduces the quantity of aggregate expenditures. {And vise versa for price decreases}
  • 5. The Net Export Effect When prices rise inside a country, imports increase and exports decrease. {and vise versa with prices lowering}
  • 6. Models and Classical Economic Thought Increases in aggregate demand won’t increase employment, and only increase prices. Say’s Law - “supply creates its own demand”. Optimism - “If we sit by and do nothing, statistically, eventually, everything will be perfect.”
  • 7. More Classical Economic Thought As interest rates go up, so do savings; inversely for business investment.
  • 8. A Combatant Has Entered The Ring Keynesian Economists say “demand creates its own supply”. Government should be involved with economy with fiscal and/or monetary policy. Prices and wages should be sticky in the short run. Savings and consumption are part of income.
  • 9. Aggregate Demand (cont,) Aggregate demand is the total demand for all final goods and services produced inside an economy at a given time at a given price level.
  • 10. Aggregate Demand (cont,) Consumption + Investment + Gov. spending + Net exports = Real GDP. L’autre influences {de consumption} (shift): Consumer Confidence (right), Household Income (right), Household borrowing (right), Marginal Propensity to Consume (right), Interest Rates (left), and Marginal Propensity to Save (left).
  • 11. L’autre Influences Plus {D’investment}: Profit Expectations (right), New Technologies Available (right), Investment Tax Incentives (right), Access to New Foreign Markets (right), Interest Rates (left). {De Gov. Spending}: Infrastructure Gov. Investment (right), Gov. Purchases via the Political Process (right).
  • 12. L’autre Influences Plus Plus {Net Exports}: Domestic Quality of Products (right), Foreign Household Income (right), Market for Domestic Suppliers (right), Domestic Price Level (left), Value of Domestic Currency (left).
  • 13. Cycles (calling some of these things “cycles” seems like a large leap to me) Business Cycle key points: Expansion, Peak, Recession/Contraction, Trough.
  • 15. Stuff and Things Net National Income is another term for factor payments, which are payments used for land, labor, and capital used in the production of goods and services (GDP). Misc. payments includes net interest, rents, and royalties paid to government.
  • 17. “Understand these concepts, combat these concepts, and relearn these concepts.” --Brunette and Ruff--