Macroeconomics Equilibrium

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Measuring National Output

Contents

 AS-AD model revision

 Macroeconomics equilibrium
 Paradox of thrift

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Measuring National Output

AS-AD model revision

Aggregate Supply – Aggregate Demand model (AS-AD)
Aggregate Demand (AD)

AD = C + I + G + X - M

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Measuring National Output

AS-AD model revision

Aggregate Supply – Aggregate Demand model (AS-AD)
Short-run Aggregate Supply (SRAS)

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Measuring National Output

AS-AD model revision

Aggregate Supply – Aggregate Demand model (AS-AD)
Long-run Aggregate Supply (LRAS):

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Measuring National Output

AS-AD model revision

Why the Aggregate-Supply Curve Slopes Upward in
the Short Run?
• The Sticky-Wage Theory
• The Sticky-Price Theory
• The Misperceptions Theory

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Measuring National Output

Macroeconomics equilibrium

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Measuring National Output

Macroeconomics equilibrium

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Measuring National Output

Macroeconomics equilibrium

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Measuring National Output

Macroeconomics equilibrium

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Measuring National Output

Macroeconomics equilibrium

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Measuring National Output

Macroeconomics equilibrium
Keynesian Theory

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Measuring National Output

Macroeconomics equilibrium
Keynesian Theory
AD = C+I+G+X-M
Yd = Y – Ti + Tr = Y – T
Yd = C + S
C = Co + Cm.Yd

S = Yd – C
= -Co + (1 – Cm)Yd
= -Co + Sm.Yd
(Sm = 1- Cm)
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Measuring National Output

Macroeconomics equilibrium
Keynesian Theory
AD = C+I+G+X-M
C = Co + Cm.Yd=Co + Cm(Y-T)=(Co –CmTo)+ Cm(1-Tm)Y
G= Go
X= Xo
I = Io + ImY
T = To + TmY
M = Mo + MmY
AD = Co + Io +Go +Xo –Mo – CmTo + ((Cm(1-Tm) +Im-Mm)Y
AD = Ao + AmY
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Overviews of macroeconomics

Macroeconomics equilibrium

• AD = Ye
• Withdraw = Injection
• Saving = Investment

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Measuring National Output

Macroeconomics equilibrium
• AD = Ye = Ao + AmY

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Measuring National Output

Macroeconomics equilibrium
Withdraw = Injection
AD = C + I + G + X – M
C+S=Y-T
Y=C+S+T
C+S+T+M=C+I+G+X
S+T+M=I+G+X

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Measuring National Output

Macroeconomics equilibrium
Saving = investment

I+G+X=S+T+M
I + (Cg + Ig) + X = S + Cg + Sg + M
I + Ig = (S + Sg) + (M – X)

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Measuring National Output

Macroeconomics equilibrium
The multiplier

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Measuring National Output

Macroeconomics equilibrium
The multiplier

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Measuring National Output

Macroeconomics equilibrium
The multiplier

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Measuring National Output

Paradox of thrift

AD = C + I + G + X-M

Yd = Y – Ti + Tr = Y – T
Yd = C + S
C = Co + Cm.Yd

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