What Are the Different Expenditure Models?

It explains how aggregate demand determines the level of national income, assuming price levels are fixed and aggregate supply can be infinitely expanded. According to this model, the actual aggregate demand is equal to the demand level of aggregate supply, but the actual aggregate demand cannot always be equal to the planned aggregate demand.

Income expenditure model

discuss

It explains how aggregate demand determines the level of national income, assuming price levels are fixed and aggregate supply can be infinitely expanded. According to this model, the actual aggregate demand is equal to the demand level of aggregate supply, but the actual aggregate demand cannot always be equal to the planned aggregate demand.

Chinese name

Income expenditure model

Equal to

Demand level of aggregate supply

Explain

How aggregate demand determines the level of national income

Brief introduction

Consumption and savings

brief introduction:

I. Traditional theories and modern interpretations of income and employment

Consumption and savings

3. Marginal Capital Efficiency, Interest Rate and Investment

Fourth, the decision to balance national income

Five, multiplier principle

Decisions on national income in six, three and four sectors of the economy

Seventh, the contradiction of frugality and the inflation gap

I. Traditional theories and modern interpretations of income and employment issues

(1) "Say's Law" and "Automatic Equilibrium Theory"

1.Say's Law

2. Market auto-balance theory

(2) Modern Theory on Income and Employment

1. Say's Law-Supply will create its own demand

Say (1767-1823) was born in the family of a large businessman in Lyon, France. He expanded the vulgar component of Adam Smith's doctrine and became the founder of French vulgar political economy.

(1) Say believes that under the condition of division of labor, everyone produces for others. The more production and the more supply, the more demand for other people's products. In exchange, currency only serves as a temporary medium. The seller will buy the product immediately after getting the currency, so the seller is the buyer, and the supplier is also the demander;

(2) Say believes that any increase in production will definitely generate the same amount of income and expenditure, and at the same time, the extra income earned from production will buy additional output, so there will be no excess economic crisis in any way. ;

(3) Say believes that each factor owner wants the factors of production that he owns to be used, and if they are not used, prices will be reduced until they are used, so there will be no unemployment.

2. Market auto-balance theory

The theory of automatic equilibrium holds that the capitalist economy is an economy of free competition, laissez-faire, and self-regulation. Economic activity itself can balance demand and supply through various self-regulating mechanisms and achieve full employment.

(1) The commodity market can be adjusted by the price mechanism;

(2) The capital market can be adjusted using the interest rate mechanism;

(3) Full employment can be achieved through the adjustment of wage rates in the labor market