y Chapter 3 The Product Market Analysis Gang Gong March 42002 Copyright Notes: This electronic file is only used as a lecture notes for the student in this class It is not allowed to be used for presentation anywhere else without the permission from the author
Chapter 3: The Product Market Analysis Gang Gong March 4, 2002 Copyright Notes:This electronic file is only used as a lecture notes for the student in this class. It is not allowed to be used for presentation anywhere else without the permission from the author
Introduction The aim of this chapter is to study how 2 output> is determined in Keynesian framework. The analysis in this chapter is often named multiplier analysis
Introduction • The aim of this chapter is to study how output is determined in Keynesian framework. The analysis in this chapter is often named multiplier analysis
p Introduction The key assumption of multiplier analysis is 2p on the demand determined, this is output is purely determined by demand. There is no restriction in the supply side of the economy. The capacity to supply the output as demanded is al ways available. The firms are able and willing to supply any level of output as demanded (at given price? )
Introduction • The key assumption of multiplier analysis is on “the demand determined,” this is “output is purely determined by demand.” There is no restriction in the supply side of the economy. The capacity to supply the output as demanded is always available. The firms are able and willing to supply any level of output as demanded (at given price?)
p Introduction In macroeconomics, aggregate demand (ad) can be defined as the sum of consumption (C), gross investment(D, government expenditure (G) and net export (E-M). c Ad=C++G+E-M2 This is indeed the GDP minus inventory change (n)
Introduction • In macroeconomics, aggregate demand (AD) can be defined as the sum of consumption (C), gross investment (I), government expenditure (G) and net export (E-M). AD = C+I+G+E-M This is indeed the GDP minus inventory change (V)
p Introduction It is more difficult to define the aggregate s 2o2 supply. Generally one simply believes that aggregate supply is a function of economic resources. (labor, capital stock, technology among others)
Introduction • It is more difficult to define the aggregate supply. Generally one simply believes that aggregate supply is a function of economic resources (labor, capital stock, technology among others)