Skip to main content
Social Sci LibreTexts

6.6: Key Concepts

  • Page ID
  • \( \newcommand{\vecs}[1]{\overset { \scriptstyle \rightharpoonup} {\mathbf{#1}} } \) \( \newcommand{\vecd}[1]{\overset{-\!-\!\rightharpoonup}{\vphantom{a}\smash {#1}}} \)\(\newcommand{\id}{\mathrm{id}}\) \( \newcommand{\Span}{\mathrm{span}}\) \( \newcommand{\kernel}{\mathrm{null}\,}\) \( \newcommand{\range}{\mathrm{range}\,}\) \( \newcommand{\RealPart}{\mathrm{Re}}\) \( \newcommand{\ImaginaryPart}{\mathrm{Im}}\) \( \newcommand{\Argument}{\mathrm{Arg}}\) \( \newcommand{\norm}[1]{\| #1 \|}\) \( \newcommand{\inner}[2]{\langle #1, #2 \rangle}\) \( \newcommand{\Span}{\mathrm{span}}\) \(\newcommand{\id}{\mathrm{id}}\) \( \newcommand{\Span}{\mathrm{span}}\) \( \newcommand{\kernel}{\mathrm{null}\,}\) \( \newcommand{\range}{\mathrm{range}\,}\) \( \newcommand{\RealPart}{\mathrm{Re}}\) \( \newcommand{\ImaginaryPart}{\mathrm{Im}}\) \( \newcommand{\Argument}{\mathrm{Arg}}\) \( \newcommand{\norm}[1]{\| #1 \|}\) \( \newcommand{\inner}[2]{\langle #1, #2 \rangle}\) \( \newcommand{\Span}{\mathrm{span}}\)\(\newcommand{\AA}{\unicode[.8,0]{x212B}}\)

    Aggregate demand determines real output (Y) and national income in the short run when prices are constant.

    Aggregate demand: aggregate expenditure (AE) at different price levels when all other conditions are constant.

    GDP(Y): the national accounts measure of the sum of actual expenditure and income in the economy.

    Aggregate expenditure (AE): planned expenditure by business and households.

    Induced expenditure: planned expenditure that is determined by current income and changes when income changes.

    Marginal propensity to consume (img249.png): the change in consumption expenditure caused by a change in income.

    Marginal propensity to import (img250.png): the change in imports caused by a change in income.

    Induced expenditure (cm)Y: planned consumption and imports expenditures that change when income changes.

    Autonomous expenditure (A): planned expenditure that is not determined by current income.

    Aggregate expenditure (AE): the sum of planned induced and autonomous expenditure in the economy.

    Short-run equilibrium output: Aggregate expenditure current output are equal (img251.png).

    Unplanned changes in business inventories: indicators of disequilibrium between planned and actual expenditures – incentives for businesses to adjust levels of employment and output (Y).

    Multiplier img252.png: the ratio of the change in equilibrium income Y to the change in autonomous expenditure A that caused it.

    6.6: Key Concepts is shared under a not declared license and was authored, remixed, and/or curated by LibreTexts.

    • Was this article helpful?