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Keynesian, Intermediate, and Neoclassical Zones

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What are the Keynesian, Intermediate, and Neoclassical Zones in the Aggregate Supply Aggregate Demand Model? We can use the AD/AS model to illustrate both Say’s law that supply creates its own demand and Keynes’ law that...

Keynesian Perspective – Aggregate Demand

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What is the Keynesian Perspective of Aggregate Demand?  The Keynesian perspective focuses on aggregate demand. The idea is simple: firms produce output only if they expect it to sell. Thus, while the availability of the factors of production determines a nation’s...

Recessionary and Inflationary Gap

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What is the Recessionary and Inflationary Gap? Keynes argued that, for reasons we explain shortly, aggregate demand is not stable—that it can change unexpectedly. Suppose the economy starts where AD intersects SRAS at P0 and Yp. Because Yp is potential output, the...

Consumption Expenditure

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What is Consumption Expenditure? Consumption expenditure is spending by households and individuals on durable goods, nondurable goods, and services. Durable goods are items that last and provide value over time, such as automobiles. Nondurable goods are things like...

Investment Expenditure

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What is Investment Expenditure? We call spending on new capital goods investment expenditure. Investment falls into four categories: producer’s durable equipment and software, nonresidential structures (such as factories, offices, and retail locations), changes in...
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