old Topic Seven

TOPIC 7: What Determines the Level of Aggregate Economic Activity

Required Readings:

  • Sexton, Section13.1 and Appendix 14
  • The Wall Street Journal

Additional Readings:

  • Sexton, Sections13.2-13.6
  • John Berry, “Two Theories of Consumer Economics”, Washington Post (on reserve)
  • Schultze, Memorandum 3

STUDY QUESTIONS FOR TOPIC 9:

  • What determines GDP?
  • What is the relation between actual and potential GDP?
  • What determines each?
  • What are the components of total planned expenditure?
  • What is consumption expenditure? What are its determinants?
  • What is the marginal propensity to consume?
  • What is investment (expenditure)? What are its determinants?
  • What is net export expenditure? What are its determinants?
  • What is macro equilibrium? How does one show it graphically?

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